The U.S. housing market is experiencing a significant slowdown, with the rate at which homes change hands plummeting to its lowest point in nearly 30 years. This trend indicates that homeowners are staying put longer than usual, a situation economists suggest is not beneficial for the broader economy. Factors such as a sluggish job market and high mortgage rates are contributing to this unprecedented lack of mobility.
Key Takeaways
- The U.S. home turnover rate has fallen to its lowest level since the 1990s.
- Approximately 28 out of every 1,000 homes were sold between January and September.
- This rate is down about 30% compared to the average from 2012-2022.
- Economic stagnation, particularly in the job market, is a primary driver.
- High mortgage rates discourage homeowners with low existing rates from selling.
Economic Stagnation Keeps Americans Homebound
The number of U.S. homes being sold as people move for jobs, retirement, or to upgrade has reached a near three-decade low. Data from Redfin reveals that only about 28 out of every 1,000 homes changed hands from January to September, marking the lowest turnover rate since at least the 1990s. This metric, calculated by dividing the number of homes sold by the total number of existing sellable properties, highlights a growing trend of homeowners remaining in their current residences for extended periods.
Daryl Fairweather, chief economist at Redfin, stated that this lack of mobility is "not healthy for the economy." The current home turnover rate is approximately 30% lower than the average observed during the same periods between 2012 and 2022. Traditionally, factors like new job opportunities or the need for more space for a growing family motivate home sales. The current decline suggests that fewer Americans perceive significant employment mobility or can afford to sell and purchase at today’s elevated prices and mortgage rates.
Fairweather further commented, "If people are stuck, it’s reflective of how the economy is stuck." She linked this phenomenon to a "low-hire, low-fire labor market." Recent job data supports this observation, with U.S. employers adding only 22,000 jobs in August, a significant drop from July and below economists’ expectations. Although September’s government hiring data is unavailable due to a shutdown, a survey by ADP indicated a loss of 32,000 jobs in the private sector during the same month. Several major companies, including Microsoft, General Motors, Amazon, and Target, have also announced layoffs, contributing to widespread concern about the slowing job market.
The Impact of High Mortgage Rates
Another significant factor contributing to the low home turnover rate is the disincentive for homeowners who secured low mortgage rates in 2020 and 2021. These individuals have little motivation to sell their current homes and purchase new ones at the substantially higher rates available today. The U.S. housing market has been in a slump since 2022, when mortgage rates began their ascent from historic lows that had previously fueled a buying frenzy.
While sales of previously occupied homes fell to a nearly 30-year low last year, sales have shown some sluggishness this year. However, sales accelerated last month to their fastest pace since February, coinciding with a dip in mortgage rates to their lowest level in over a year. Despite this recent easing, borrowing costs remain prohibitively high for many Americans, especially considering the median sales price of existing homes has surged by 53% over the past six years.