The Great Recession still looms large in the housing market, as homeowners who took advantage of low interest rates at the beginning of the decade are increasingly electing to stay in their properties instead of trading up.
“Although homeowners have more equity today, most of them also have ultra-low-rate mortgages they locked in during the recession, when rates were consistently below 4%,” Urban Institute researcher Karan Kaul wrote in a Tuesday post that probed the reasons behind a steady decline in repeat home-buying in the United States. “If a homeowner with a 3.5% rate were to trade up to a bigger home, it would come with a new mortgage at the prevailing, higher rate.”
That trend has conspired to boost the ranks of first-time homebuyers, who in 2017 accounted for 60% of all purchase mortgages taken out with the Federal Housing Administration and other government-sponsored enterprises (GSEs) — a significant jump from the 40% before the financial crisis of the late 2000s.
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