Squeezed by high interest rates and record prices, homeowners are frozen in place. They can’t sell. So first-time buyers can’t buy.
If buying a home is an inexorable part of the American dream, so is the next step: eventually selling that home and using the equity to trade up to something bigger.
But over the past two years, this upward mobility has stalled as buyers and sellers have been pummeled by three colliding forces: the highest borrowing rates in nearly two decades, a crippling shortage of inventory, and a surge in home prices to a median of $434,000, the highest on record, according to Redfin.
People who bought their starter home a few years ago are finding themselves frozen in place by what is known as the “rate-lock effect” — they bought when interest rates were historically low, and trading up would mean a doubling or tripling of their monthly interest payments.
They are locked in, and as a result, families hoping to buy their first homes are locked out.
I hate the phrase “starter home.” People don’t need 3000 sqft homes unless they have 10 kids.
I lived most of my childhood in a 100 year old 1000 sqft home with 1-2 siblings. Some extra space would have been nice but definitely not 3x as much. My current home would be considered a starter home at 1200 sqft. We will likely add on to get another bedroom and also not have a myriad of toys in the living room but I can’t see it adding more than 300 sqft. That would make it a 4 bedroom house with a den which is perfectly fine. People seem to consider anything under 2000 sqft to be a starter home which is absurd.
What we do need is for many starter homes to become available for sale. Many are simply turned into rentals.
People don’t need 10+ kids either.
The never ending diapers that would be 10 kids…
I grew up in an almost 3000 sq foot home with only 5 kids. I know you were using hyperbole with the ten kids thing, but it was cramped with 7. Always sharing bedrooms, never actually getting your own space, no playing music without bothering someone, hard to do homework when your sister is practicing her oboe. If you want a dining room table that fits everyone and a living room where your family can stretch out for a movie, you need the space. (Also I grew up in Florida so no basement or attic. Not sure how those figure into sq footage)
I’d happily live in a shed if it was large enough to fit the usual amenities. Basically, give me 200sqft and half the cost in rent and watch as I live with almost nothing and be happy. Computer, bed on the floor, small standing shower, and we’re like 80% of the way there.