Cautious homeowners are reluctant to move on
For much of last year, Greg Rubin was looking to buy a bigger house. He has been in the same two-bedroom home for 17 years and hoped to upgrade.
This year Rubin has a new plan. He stopped looking and embarked on a home renovation.
“My girlfriend would like to get a larger house, but right now I’m staying put,” said Rubin, who lives in Escondido, Calif.
Rubin is the face of what appears to be a new normal in the real estate business: Homeowners are moving less, creating a drag on the economy, fewer commissions for real estate brokers and a fiercely competitive market for first-time home shoppers.
For many homeowners the desire to stay put began out of caution or necessity. Rubin’s landscaping business lost more than half its revenue in the years after the Great Recession. Millions of other homeowners lost their jobs or were stuck in homes worth less than they owed the bank — two big reasons that the median homeowner tenure rose to about 8-1/2 years last year, up from about 3-1/2 in 2008, according to data from Moody’s Analytics and First American Financial Corp. That is the longest tenure since their data began in 2000.
But even though the economy and the housing market have improved, economists expect elevated homeowner tenure to continue for the next decade or even longer. That is because the better economy has come with a steady rise in interest rates. Like tens of millions of others, Rubin refinanced when mortgage rates were near a historic low. He has a 3.25 percent interest rate on his home loan, so even if he could find a similar home for the same price, his payment would go up considerably. For a 30-year fixed-rate $500,000 mortgage, an interest-rate rise to 5.5 percent would increase the monthly payment roughly $700 to $3,600, including estimated taxes and fees, according to Zillow, the real estate data service.