Robert Armstrong bought his Brooklyn home in 2020 with a 30-year fixed-rate mortgage at 2.75 per cent. Today, rates exceed 7 per cent, locking him into a low-rate loan that prevents selling or moving. This "golden handcuff" is widespread, causing US home prices to remain "sticky down" and existing sales to stagnate at 4mn units a year.
The Atlanta Fed’s affordability measure is as bad as in 2006, pushing the median first-time buyer age to 40. Builders face rising costs and labor shortages, with housing starts falling since 2022. While the economy grows, housing contributes nothing to GDP growth.
The Fed raised rates to cool overheating, but the traditional housing channel is broken. Tech investment and stock market wealth now drive the cycle instead.
Source: Financial Times Companies · Summarized by HeadlinesBriefing