Americans slow to move into new homes

Pricey broker fees, transaction costs, mortgage fees drag on household mobility, chart shows

New York /
Jul.July 10, 2014 02:05 PM

The household mobility rate, or the percent of the population that moves into a new home in a year, has been in a long-term decline. This trend has been unfavorable for the housing market, which in turn has been a drag on GDP.

According to Michelle Meyer at Bank of America Merrill Lynch, the household mobility rate has been slowing since the mid-1980s.

A key driver of this trend has been the rise of homeownership in the 1990s. Homeowners are less like to move than renters. It’s much more expensive for homeowners to move because of broker fees, transaction costs, mortgage fees, insurance and so on.

From 2000 on, aging population and changes in the labor market have also been negative for household mobility.

There Are Two Reason Why Household Mobility Could Improve

In the short run, two factors could cause household mobility to pick up: the decline in homeownership rates and rising home prices.

“The homeownership rate has plunged from the peak in late 2004, and we think the risk is that it continues to slide,” writes Meyer. “Homeowners are less mobile than renters — from 2012 to 2013, 25% of renters moved compared to 5% of owners. The shift toward greater renting should boost the aggregate mobility rate.”

Negative equity, in which a borrower owes more on their mortgage than their home is worth, also reduces household mobility. “As home prices continue to rise, a growing number of homeowners will move into positive equity, allowing for greater mobility,” she writes.

Longer-Term Trends Remain Unfavorable

In the long run however, an aging population and the end of ultra-low mortgage rates will curb household mobility.

“The greatest propensity to move is when people are in their late 20s. The mobility rate steadily declines thereafter as people age,” according to Meyer.

“We should also be concerned that mortgage ‘lock-in’ will reduce mobility over the medium term. We expect rates to head higher in the coming years, increasing mortgage payments. It will be difficult for those homeowners who bought or refinanced to a fixed-rate mortgage over the past few years to give up the record low rate.”

Meyer told Business Insider in an email interview that, in the short-run, an uptick in household mobility will help boost residential investment as a share of GDP. In the longer-term, however, “residential investment may struggle to return to the historical average of GDP, suggesting lower multipliers from housing to the rest of the economy going forward.”


Related Articles

arrow_forward_ios
Top October loans: Cash cows, big buys, foreclosure avoidance
Top October loans: Cash cows, big buys, foreclosure avoidance
Top October loans: Cash cows, big buys, foreclosure avoidance
Clockwsie from top left: Aby Rosen with 980 Madison Avenue, 258-278 Eighth Avenue, 1 West Street and 511 Lexington Avenue (RFR, JJ Operating, Google Maps)
These were the largest Manhattan real estate loans in July
These were the largest Manhattan real estate loans in July
Lenders are being stingy about granting home equity lines of credit. (iStock)
Home values are up, but just try getting a line of credit
Home values are up, but just try getting a line of credit
Blackstone's Jonathan Gray (Photos via Twitter;iStock/Photo Illustration by Kevin Rebong for The Real Deal)
Blackstone, LBA Logistics get $944M financing for logistics portfolios
Blackstone, LBA Logistics get $944M financing for logistics portfolios
The Grace Building at 1114 Sixth Avenue (Photo via Wikipedia Commons)
Here’s what tenants are paying at Brookfield & Swig’s Grace Building
Here’s what tenants are paying at Brookfield & Swig’s Grace Building
The Grace Building (Google Maps, Brookfield, iStock)
Brookfield and Swig land $1.3B refi of Grace Building
Brookfield and Swig land $1.3B refi of Grace Building
Acting US Attorney for Eastern District of New York Seth DuCharme and Bank of America CEO Brian Moynihan (Getty, Twitter, iStock)
Bank of America will pay $300K to settle DOJ mortgage lending discrimination claim
Bank of America will pay $300K to settle DOJ mortgage lending discrimination claim
The Coca-Cola building at 711 Fifth Avenue and Michael Shvo (Credit: Google Maps)
Michael Shvo, partners secure $545M loan for Coca-Cola building
Michael Shvo, partners secure $545M loan for Coca-Cola building
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...