Data: Black Knight; Diagram: Axios Visuals
Nine out of ten mortgages in America have an interest rate less than 5%, which is the official level at which most new 30-year fixed-rate mortgages are now being written.
Why it matters: Homes are affordable – if you already own one. According to Fannie Mae’s most recent National Housing Survey, 92% of homeowners say their current home is affordable. Even more impressive, 91% of low-income homeowners say the same, up from just 79% at the end of 2017.
- However, if these homeowners were to move, they would have to pay significantly more in interest payments.
The big picture: If you have a mortgage that is much cheaper than what you would have to pay to move, there is a significant financial incentive to stay there. The result is that, thanks to the dynamics of supply and demand, higher mortgage rates are less likely to translate into lower house prices.
Between the lines: When mortgage rates go up, the supply of homes coming onto the market goes down. Lower supply means higher prices, especially in areas where many buyers bid cash.
The bottom line: Americans hold on to their cars much longer than they normally would because they are so expensive to replace. Something similar is beginning to happen in real estate as well.