Who's left to buy overvalued houses? Too few to prop up bubble valuations

If as many posit the Federal Reserve has an unstated mandate to generate a "wealth effect" by propping up housing, they've managed to create a no-win situation. As longtime correspondent K.M. recently documented, roughly half of the 50+ million home mortgages in the US were refinanced in 2020 and 2021 to lock in historically low interest rates of less than 4%, with many around 3%.

Closed-end originations (excluding reverse mortgages) increased in 2020 by 65.2 percent, from 8.3 million in 2019 to 13.6 million in 2020.

Almost 25% of homeowners refinanced in 2021.

About half (51%) of homeowners have a rate under 4%.

As K.M. observed:

"That doesn't include the millions who bought houses 2020 - 2021 at rates below 4%, who similarly are unlikely to sell unless rates drop well below 5%. Those who got rates below 3% or thereabouts, may be permanently off the market.

Think about it - why would I sell and surrender a 2.75%, 3.00% or 3.25% 30-year mortgage, only to move into another house with a loan at 5.5% - 6.5%? I'm locked into my house and loan for years if not decades.

And then there are reverse mortgages, which essentially lock the elderly in their houses for life. That's been a housing stock reduction force for years now and may explain the increase in the number of houses in obvious disrepair.