US existing-home sales stuck a third below pre-2020 level, sub-5-percent mortgages lock owners in place while prices set records, transaction volumes at mid-1990s levels with seventy million more Americans

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zerohedge.com

Existing-home sales in the United States have run roughly a third below their pre-2020 level for three consecutive years, according to Zero Hedge — yet the median home price has repeatedly set records over the same period. The explanation is arithmetic, not demand: a large majority of outstanding US mortgages carry rates below 5 percent, while new buyers face borrowing costs several hundred dollars a month higher than what current occupants pay for the same house.

The number of homes changing hands in a twelve-month window has fallen to a level last seen in the mid-1990s, when the American population was roughly seventy million people smaller. Mortgage rates rose about four percentage points in roughly eighteen months, and owners who locked in cheap pandemic-era loans now face a simple choice: sell into a 7 percent market and surrender a 3 percent loan, or stay put. Most stay put. The market clears nothing, so prices stay nominally upright while transaction volumes sink toward standstill.

The casualties are accumulating along the chain. Appraisers are valuing homes against comparable-sales data that is months out of date. Agents are leaving the business because there are no commissions; lenders are cutting staff because there are no loans. Meanwhile the costs that have nothing to do with interest — insurance premiums, property taxes, maintenance, condominium assessments — have climbed fast enough that in many ZIP codes they now shape the monthly cost of ownership at least as much as the purchase price does.

A decade and a half of underbuilding left too few houses for the households that already exist, and the reforms that would legalize more construction take three to five years to produce occupied homes — a lag longer than most political cycles, which is one reason the shortage persists across administrations of both parties. The result is a two-tier system: people who closed before 2022 are insulated inside the standoff and often better off each month than if they were starting fresh. People who did not buy are paying for the freeze in rent, in years of saving for down payments, and in moves never made.

The Federal Reserve's rate intervention did not make housing cheaper; it made it immobile. The world's most liquid asset market is now a museum where the exhibits are owned and nothing is for sale.