[benjaminwootton]

I don’t understand.

I buy a house with a $300k mortgage. The price rises to $500k. I then sell the house and buy another for $500k, rolling my $200k equity and $300k mortgage for no net change.

If you are trading up then yes, the more expensive house rose faster than your house. But that’s the case anytime you move and not unique to a job relocation.

[silisili]

In addition to the other great comment about rates affecting prices, don't forget deep cleaning the house, staging it, paying a 'licensed professional' to fix what the buyer inspection may find, then 6% in realtor fees, then taxes, potentially a lot if you haven't been there two years. In no event will you be rolling $200k equity over in that scenario.

[ProfessorLayton]

What you're missing is that the after (optimistically) netting 200k from a 300k house, is that the next house is really a lateral move to another 300k house being sold for 500k, but with higher property taxes (At least in states like CA).

This would only theoretically work going from a HCOL area to a lower one, and then moving again becomes even harder.

[nradov]

Nope, there is a huge net change because interest rates have increased. Mortgage rates bottomed out in 2020 at about 2.65%, so the monthly payment on a $300K mortgage was only $1209. Now at 5.87% the payment would be $1774.

https://fred.stlouisfed.org/series/MORTGAGE30US

[woobar]

Why are you comparing to the absolute minimum? Didn't people use to have mortgages before 2020? My first house was close to $300K, mortgage was 6.5%. No one was crying about this back then.

[nradov]

I am comparing to the absolute minimum because most homeowners with decent credit ratings refinanced their loans a couple years ago near the minimum. Now they can't afford to sell their current homes and buy in a different area because the monthly payments would be unaffordable (unless they buy in a much cheaper area or a much smaller home).

I don't think anyone is crying about it but this is reducing labor mobility and slowing down economic growth. It's one of the unintended consequences of the Federal Reserve raising interest rates due to inflation.

[woobar]

Wait a second. They were able to pay that mortgage before they refinanced, right? And the rates 5 years ago were close to 5% (according to your chart). Suddenly rate get close to what was normal just five years ago and we are talking about most people not able to move.

[sokoloff]

The 2023 house they’re looking to buy costs more than the 2018 house they could afford at 5%.

We bought in 2007. Our house more than doubled in price since then. I’m not sure I could afford to buy it now if I was a typical 20% down buyer.

[woobar]

I will not argue about someone's ability to buy a new house in the current environment. But in this thread discussion is focused on existing homeowners moving to a new house.

In your case (assuming $300K original house price) you will sell it for $600K, net $264K profits after commissions. Use profits plus $60K of original downpayment and any additional equity in the old house as a downpayment for a similar house at $600K. The new mortgage will be similar to one you had in 2007. Same rate and most likely smaller principal. Not a big difference.

[Rebelgecko]

Why didn't you refinance in 2020-2022 when interest rates were so much lower? If the prevailing rate is 3%, you're leaving money on the table by sticking with your original mortgage (unless it's almost paid off)

[woobar]

My point was that paying 6.5% on a $300K mortgage was a normal thing just 15 years ago. In fact it did not stop anyone from buying in the run to the great recession (aka "subprime mortgage crisis").

I don't have mortgage now, so no, I am not leaving money on the table.

[throwaway2037]

What if you bought a the peak and the house price falls? Negative equity, right?