What the data shows
From the end of 2022, I pointed out that people continued to sell houses with low mortgages to buy others at higher prices. This is common behavior, as millions of Americans sell their homes to buy others every year, regardless of mortgage rates. As the data below shows, more people now have mortgage rates above 6% than below 3% and the share of households with mortgages between 3% and 6% has also decreased over the past few years.
In addition, as of Q1 2022, the number of homeowners with mortgage rates between 2%-5% has been declining as a percentage of their mortgages.
Homeowners with mortgage rates at 6% or higher:
- Q1 2022: 6.99%
- Q3 2025: 21.2%
Homeowners with mortgage rates at 3% or less:
- Q1 2022: 24.58%
- Q3 2025: 20%
Homeowners with rates between 3% and 4%:
- Q1 2022: 40.48%
- Q3 2025: 31.5%
Obviously we have an increase in high levels and a decrease in those who had low levels.
You may be wondering who would give up 2.5% to 5% of their mortgage to buy a home at a higher price, but rate is just one factor. Home values, property taxes, insurance and loan size all affect the total payment. This is different from the years of the housing crash, when more than 23% of homes were underwater – now most Americans have more equity when they sell.
Not only do these homeowners have large sales shares, but theirs FICO scores since 2010 have been very good, and their income and gross earnings relative to their mortgage payments have been low. So, with more equity for sale and higher net worth, they were able to sell their home and buy another one, even with a higher mortgage rate.
As you can see below, foreclosure data has not returned to 2019 levels, many homeowners are in a better financial position to sell their home and buy another one. We don’t have many underwater homes in America, or high foreclosure rates.
On the inventory side of the equation, we’re not back to normal levels, but inventory has grown over the last few years. Normally, we have 2-2.5 million active lists, and we are 1.43 million according to National Association of Realtors data, with one more month of seasonal decline remaining. Remember, 40% of homes don’t even have a mortgage to cover it.
When it comes to searching, first-time homebuyers face affordability challenges beyond the mortgage amount – including mortgage rates, taxes, insurance, down payment and loan size. These potential home buyers obviously can’t be locked into their mortgage rate because they don’t own a home yet.
The conclusion
To sum it up, I have not supported the idea of foreclosure in the last decade or so. I also don’t believe that real estate agents will suddenly change their behavior just because prices are high.
Home rents have doubled or tripled since 2008, an important factor that is often overlooked, while much attention goes to the so-called golden handcuffs of subprime mortgages.
