Like many homeowners who purchased their homes between the years of 2017 and 2022, my husband and I are finding ourselves in a pickle. We have all this equity in our home, but we can’t sell! There’s no upsizing or downsizing in our immediate future. Why? Because of a phenomenon I like to call Entrenched Homeowner Syndrome.
During the years prior to and during the COVID-19 pandemic, many of us took advantage of historically low interest rates to purchase our beautiful homes. With interest rates ranging from 2.5% to 4%, we were able to obtain the home of our dreams at payments we could afford and at prices that were reasonable.
Fast forward to today and you’ll find interest rates hovering around 7%, and housing prices at record highs. Here’s an example of what this means for many homeowners:
Now if you look at these examples, on the surface it seems like it’s not a bad deal if we’re downsizing. I mean, we’ll get to keep approximately $150,000 but we have to put down $100,000 just to get our payment to $2415/month, which is over $800/mo. more than our current mortgage payment. What if we wanted to pay down some current debt? That would leave us even less!
If we wanted to upsize it would be even worse. Yes we could get a larger home but we’d have to put down a huge chunk of our equity just for the privilege of paying over $2800/month more than we currently pay for just 700 sq. ft. more than our current home.
So, do you see now why homeowners are essentially stuck? It just doesn’t make good financial sense for many of us to sell right now. This, folks, is what it means to have Entrenched Homeowner Syndrome.
What does this mean for the housing market? It will continue to be a shortage of inventory, which means demand will still outpace supply which means the price of housing will continue to rise.
