The Housing Bubble: Owners Trapped by Low-Rate Mortgages, Buyers Thwarted by High-Rate Mortgages, by Charles Hugh Smith

If you have a low rate mortgage you don’t want to sell and if you’re confronted by high mortgage rates you don’t want to buy. Neither one is good for the housing market. From Charles Hugh Smith at

Who’s left to buy overvalued houses? Too few to prop up bubble valuations

If as many posit the Federal Reserve has an unstated mandate to generate a “wealth effect” by propping up housing, they’ve managed to create a no-win situation. As longtime correspondent K.M. recently documented, roughly half of the 50+ million home mortgages in the US were refinanced in 2020 and 2021 to lock in historically low interest rates of less than 4%, with many around 3%.

Closed-end originations (excluding reverse mortgages) increased in 2020 by 65.2 percent, from 8.3 million in 2019 to 13.6 million in 2020.

Almost 25% of homeowners refinanced in 2021.

About half (51%) of homeowners have a rate under 4%.

As K.M. observed:

“That doesn’t include the millions who bought houses 2020 – 2021 at rates below 4%, who similarly are unlikely to sell unless rates drop well below 5%. Those who got rates below 3% or thereabouts, may be permanently off the market.

Think about it – why would I sell and surrender a 2.75%, 3.00% or 3.25% 30-year mortgage, only to move into another house with a loan at 5.5% – 6.5%? I’m locked into my house and loan for years if not decades.

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