Housing gridlock: More than half of homeowners who want to move were unable to

The housing market is in gridlock as high mortgage rates and home prices continue to stall homeowners: the majority of those who want to move cannot. Renters are struggling to buy, starter homeowners are struggling to upgrade to their forever homes, retirees are struggling to relocate, and so on, culminating in a serious bottleneck in the residential real estate market. As of June 2024, existing-home sales fell 5.4% from a year ago, and the median sale price is now the highest ever recorded at $426,900¹.

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According to Point’s latest research², this housing market impasse has only worsened over the past year: only 35% of homeowners had a desire to move when surveyed last year; now 72% say the same today. With nearly three-fourths of homeowners looking to move at some point, and homeowners delaying or canceling plans in the short term, would-be buyers are stacking up and causing serious congestion. This has often been referred to as the “lock-in effect” as it relates to increasing interest rates and housing costs. Point’s research shows homeowners are often getting stopped in their tracks as they try to move in this ever-tightening housing market.

Wreck my plans: 55% of homeowners have tried to move recently but were unable

Point’s research found that over half (55%) of homeowners who said they actively planned to buy a new home within the last 12 months have been unable to do so. 

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High home prices and high mortgage rates are the leading reasons why homeowners are staying put. High home prices were the most cited cause, with more than half of homeowners (51%) saying this would stop them from moving in their desired timeframe. A close second, 48%, say they’d end up with a higher mortgage rate if they were to move now. A lack of housing inventory—another symptom of the housing gridlock—also caused homeowners to delay or cancel their moving plans this year, with 27% of homeowners who delayed or canceled a move saying they were unable to find another home they wanted to buy.

Top reasons moves were delayed or canceled

Wishful Thinking: Most Homeowners Have a Desire to Move – but Can’t

While many homeowners went so far as to plan a move within the year, according to survey results, even more of them daydreamed about it. The number of homeowners who wish they could move has risen nearly 40 percentage points over the past year. Today, 72% of homeowners wish they could move at some point, up from just 35% a year ago. There’s also more urgency among those who wish to move. This summer, nearly half (47%) of homeowners said they want to move sometime in the next 12 months, compared to just over one in ten (11%) who said the same in the summer of 2023.

Do you wish you could move (sell your current primary residence and buy a new one)? If so, when?

But while the appetite for moving is strong, most homeowners aren’t actually packing boxes any time soon, with pessimism significantly higher over the past year. Among homeowners who want to move, only 21% think they will in the next 12 months, despite 47% wishing they could.

When do you think you will actually move, if at all?

The Sub 6% Mortgage Rate Fantasy

With mortgage rates impacting many who hope to move, homeowners may be waiting longer than they’d like. Among homeowners who wish they could move but say mortgage rates are stopping them from doing so, 90% said that mortgage rates would need to drop below 6% for them to consider buying in the next 6-12 months.

What would mortgage rates need to be for you to consider purchasing another home in the next 6-12 months?

In recent history, mortgage rates under 6% have been considered the norm: the average 30-year fixed mortgage rate was under 6% from late November 2008 until early September 2022, according to the Federal Reserve. However, looking back further, rates above 6% were much more typical. According to the Federal Reserve³, mortgage rates under 5% didn’t become common until around 2009. 

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While some experts⁴ said earlier this year that mortgage rates dropping below 6% could be possible, the general consensus is not to expect it to happen before the end of 2024. However, there has been a glint of optimism as rates dipped to a new low in August. 

What’s the Rush? Why Do Homeowners Want to Move?

Affordability concerns around mortgage rates and home prices are keeping homeowners in place, but other factors – namely their home’s size and location – are leading to their desire to move in the first place. Of those looking to move, about 40% said the primary reason was the size of their house, be it wanting to move somewhere bigger (25%) or smaller (16%). That’s up from 33% who had similar reasons for wanting to move last year. Meanwhile, 36% of those who wish to move cited something about location as their primary reason. Only 11% said they wanted access to their home’s equity, and just about 8% said their current home is too expensive.

Why do you want to move? Choose the primary reason.

For the 40% of homeowners who want to move due to their home’s size, there could be a solution: renovating. After all, making home additions can help with space concerns, and adding specific home features can make it easier to age in place rather than downsize. Two-thirds (66%) of homeowners surveyed plan to perform renovations on their homes in the next 12 to 18 months. 

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For homeowners planning renovations, cash is king: 39% of homeowners plan to use cash to fund their projects, compared to about 27% who plan to take out a HELOC or a cash-out refinance. Interest rates are still a factor for those looking to take on renovations: of those not looking to get a HELOC or refinance, 35% said it was because interest rates on these products are too high. A home equity investment, which doesn’t factor in the current interest rate or add a new monthly payment, could be an option for some homeowners.

How will you pay for renovations?

Conclusion: An Impending Wave

The inability of homeowners to move has created a deadlock in the housing market, which could continue for some time.  While homeowners who feel stuck can look for alternatives to make their current home work better for them - be it a new kitchen or converting rooms into a rentable apartment – options to do so are limited for those who want to change locations or who simply cannot afford their current housing situation. 

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For now, many homeowners remain in a holding pattern, hoping for a shift in market conditions to unlock their ability to move. Time will tell how long it will take for homeowners to start moving or what the final straw will be to get them packing. Given buyers’ attitudes towards their ideal mortgage rates, it will take significant movement cuts to current rates for any activity to start picking up and loosen the gridlock the market finds itself in.