When it comes to the American dream of home ownership there is a pretty established storyline.
Young couples at the start of adulthood purchase a smaller home often called a starter home. After a few years. they build up equity and when it is time to expand their family they sell that starter home and look for something bigger.
But thanks to the current market housing experts say there has been an unexpected plot twist in that storyline - people aren’t selling their starter homes.
The reason behind this trend is pretty obvious: Interest rates. Right now the interest rate for a 30-year fixed-rate mortgage is hovering around seven percent. Just a few years ago it was around two to three percent. So people who locked in that historically low rate are reluctant to move. According to Freddie Mac, six out of 10 U.S. homeowners have mortgages locked in at four percent or less.
There is now a disturbing sequel to this new storyline. Because people are not moving out of their starter homes, demand is driving up the price of these once affordable options. According to the New York Times, prices in that category are growing at a faster rate than the rest of the market, nearly tripling in the past 20 years, meaning that many young adults are being priced out of their happily ever after.