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The housing market has changed the mathematics of moving

In this housing market, it makes less and less sense to move. American homeowners who are sitting on the lowest mortgage rates in modern history will find it far more expensive to buy their next home. Tenants facing high inflation may be better off renewing a lease than looking for a new one. And for most everyone, it has become more difficult to find the right next home when there are so few vacancies.

The easiest and most affordable decision for many Americans will be to stay there – even if their homes become too small, too large, too crowded, too far from work, too isolated from the family or too much to maintain.

The rate at which Americans move, both across the city and across the country, has been steadily declining since the 1980s. Now all conditions in the housing market have been adjusted to reduce the mobility rate even more. It is a problem both for the wider economy – workers may have to relocate to reach new jobs – and for millions of households who will find it difficult to change their homes to match their changing lives.

“All of this suggests that America may be stuck in place,” said Lawrence Yun, chief economist at the National Association of Realtors.

A likely consequence: “Unanimously,” said Yun, “I think people will say that there is less happiness in the country because people live in a misplaced unit.”

Kyren Bogolub’s misplaced unit is a two-bed, one-bath duplex in Boulder, Colo., Which she shares with her partner and a third roommate. They moved into 2020, attracted to what seemed like a temporary, cheap and dog-friendly home – a good place to complete graduate school on meager scholarships.

But a year after graduating, they still live like this: Ms. Bogolub and her partner, Colin Sturrock, in a bedroom that houses their twin-size bed and the two desks where they work remotely. They have set up the room so that one of them can change clothes even if the other is on Zoom. They have taped over the flashing data lights that can make it difficult to sleep at night.

“The plan was to upgrade, get a job, move,” said Bogolub, 33. “We’ve done two of those three things.”

The third has proved far more difficult. Their alternatives are a study in the absurdity of the US housing market today. Stone rents have risen by more than 15 percent in the past year. Boulder County also lost more than a thousand homes to forest fires in December, making competition for housing even tougher. Bogolub has also looked at buying. Then a small two-bed house with one bathroom a few blocks away was sold this month: 864 square meters that need a conversion for 1.25 million dollars.

In comparison, the bedroom with the two desks does not seem so bad – even for two adults in their 30s with decent jobs.

“That’s what’s a little overwhelming,” said Bogolub, who now works for the Colorado Geological Survey. “If we can not really do this, I do not know who can.”

In the mid-1980s, about one in five people in America moved annually, most within the same county. By 2021, this number had dropped to one in 12. And all signs this spring indicate that even more are stuck as Bogolub has been: New mortgage applications and home sales have fallen. The money spent on rebuilding homes has increased sharply. And tenants renew their leases at record levels.

The housing market has changed the calculation to move for almost everyone. With rental prices rising at record speeds, tenants are usually faced with smaller price increases that stick to their current landlord than signing a new lease. This is because landlords want to avoid the cost of finding new tenants and selling a property.

“You get a discount for staying there,” said Jay Parsons, chief economist at RealPage, a platform used by property managers to process and track rent. The problem is not just that it is more expensive to move, he said. The buildings with the most vacancies today are also the most expensive.

In the calculation for homeowners, mortgage rates fell to a modern low earlier in the pandemic. With widespread refinancing, four out of five mortgage holders today have an interest rate below 5 per cent (half have an interest rate of 4 per cent or lower). Now, these affordable prices will have the effect of locking many homeowners in place if interest rates remain high after a recent rise.

These dynamics are further linked to each other. When people buy a home or find a new rental, they create a chain of vacancies that opens up behind them.

“Most people live by the decisions of others to leave a unit,” said Dowell Myers, a professor of politics, planning and demography at the University of Southern California.

Each newly built home has a similar effect, enabling a number of vacancies, including among rentals. Conversely, every person who do not relocation helps to seal the local market for others.

Economists have primarily been concerned about the long-term decline in long-distance migration, given that migration from one part of the country to another has tended to be a source of upward mobility.

But today, the most affluent parts of the country also have the most expensive homes. It discourages people from moving to where they can find better jobs, and ultimately limits US economic growth, economists say.

However, since the housing disruption in the mid-2000s, almost the entire nationwide decline in mobility has come from a fall in local relocations, and in local relocations with tenantsfinds Mr. Myers and colleagues.

During this time, the supply of new homes built in America has increasingly fallen behind demand. Millennials, now the largest living adult generation, came of age during the same period and tried to form their own households and later buy their own homes. The combination of the demographic pressure and the growing housing shortage helped to set up the reasonableness crisis today.

In 2019, at the end of the pandemic, there were 19.4 million more tenants in America than in 2006. So we expect that there will be many more tenants by then as well. But in 2019, it was actually 3.6 million fewer tenants who had moved the year before than in 2006.

“It’s a sharp decline,” said Riordan Frost, who studies mobility at the Harvard Joint Center for Housing Studies. “It’s really only going to get lower as people can not afford to pay the rent” on a new unit.

All of this means something, he said, not just because people need to move for better jobs or better-adapted homes. America is still deeply separated by race and income, and research shows that neighborhoods where children grow up affect their fortunes in life. If people do not move as often, Mr. Frost said, families in segregated or less affluent places have less chance of breaking out of these patterns.

“If people fail to relocate to adapt to changing family circumstances, it has enormous social costs,” said Michael Andersen, a researcher at the Sightline Institute, who advocates for larger housing construction. That means young families who can not move near relatives for help, or aging Americans isolated from social networks.

In the years to come, many households will simply not come out of a kind of paralysis of indecision.

Joe Swiderski and his wife have lived in the same house in Washington since 2013. They want more space for their two daughters, now 7 and 2. But they refinanced during the pandemic on a 20-year loan that shaved off three years of their mortgage and cut interest rates. to 2.5 percent. It has made what should be a fairly simple decision – a growing family needs a bigger house – much more complicated, Swiderski said.

“What else are you going to weigh?” he said. A larger garden, or a higher interest rate? The lack of storage, or the sky-high price of housing? “What’s going to be the tipping point?” he said. “We do not necessarily know.”

Ms. Bogolub, in Boulder, will most likely also stay until further notice, if her landlord again offers to renew the lease without increasing the rent. During the time she and Mr. Sturrock have lived in this home, however, their lives have changed in at least one way that can facilitate their home search: A few months ago, their dog died.

“When it happened,” Bogolub said, “I thought in a way, ‘Well, I guess on the one hand, this probably improves our rental opportunities.'”

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