Dr. Bob Wood on why so many Americans feel trapped in their homes by their low-rate mortgages
Posted on August 1, 2023 by MCOB Outreach
MCOB Professor Dr. Bob Wood was recently featured on CNBC for his article on 'Why so many Americans feel trapped in their homes by their low-rate mortgages.'
Dr. Bob Wood a professor of Economics, Finance & Real Estate gave his take on the matter in hand.
An extract from the article is as follows;
Bob Wood, 66, has been thinking of selling his home in Mobile, Alabama. The finance professor and his wife, Terri, purchased the 5,000-square-foot house with a pool nearly a decade ago. “It’s probably time to downsize,” he said. They would also like to be closer to their grandchildren in Tennessee.
And yet, “we are in the 10th year of a 3.125% 15-year fixed mortgage,” he said. They don’t want to move now and give up that low rate to buy at a higher rate.
“We just don’t want to pay that much in interest.”
Wood is among “a stock of people sitting on very cheap mortgages,” said Tomas Philipson, a professor of public policy studies at the University of Chicago and former acting chair of the White House Council of Economic Advisers.
Those homeowners would need to finance a new home at a higher rate than the rate they currently hold, adding hundreds of dollars a month to their mortgage payment, which has created an incentive to stay where they are. For them, opting not to move is “the right strategy.”
With home prices and interest rates on the rise, “the consumer is best advised to stay put,” Philipson said.
You can read the full article here.
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