Boomers in Pittsburgh are least likely to be locked-in by mortgage rates, among major metros

Rhea-AI Summary

Zillow research reveals that Pittsburgh, Buffalo, and Cleveland have the highest percentage of homeowners without mortgages among the top 50 U.S. metros. Baby boomers are the least affected by rate lock, with 17% mortgage-free compared to 6% of millennials. Gen Z, with lower home equity, is expected to stay put. Boomer homeowners in Pittsburgh show resilience against high mortgage rates.

Real Estate Market Analyst

The data indicating a rise in new listings in areas with a higher percentage of homeowners owning their properties outright presents an interesting dynamic within the real estate market. This trend suggests that the absence of mortgage rate lock-in is a significant factor in the liquidity of the housing market. Homeowners without the burden of current mortgage rates are more agile, able to respond to market conditions without the disincentive of higher rates on new mortgages. This could potentially lead to increased inventory in these markets, which may help to stabilize or even reduce home prices in the short term.

Furthermore, the generational divide highlighted, with baby boomers being the least affected by rate lock, underscores the varying impacts of economic conditions on different age groups. Baby boomers, with greater equity and less debt on their homes, are in a stronger position to sell and buy, unaffected by recent rate hikes. This could influence market dynamics, potentially leading to a shift in the types of homes available, as well as the demographics of homebuyers and sellers in the coming years.

Economist

From an economic standpoint, the relationship between homeownership without mortgages and the propensity to list homes is a reflection of the broader economic principle of mobility and flexibility. Owners with no mortgage constraints are more responsive to economic incentives, such as downsizing for retirement or cashing out on home equity in a high-demand market. This mobility can have a ripple effect on local economies, as it may encourage consumer spending and stimulate the housing market.

However, it's important to note that while this trend could benefit certain local economies, it may also exacerbate generational wealth gaps. With millennials and Gen Z homeowners being more affected by mortgage rates and having less equity, their ability to move and capitalize on the housing market is limited. This could lead to a reinforcement of existing disparities in wealth and homeownership between generations.

Demographer

Examining the demographic implications, the concentration of mortgage-free homeowners in specific metros could lead to shifts in population densities and age demographics within these areas. Cities like Pittsburgh, Buffalo and Cleveland might experience an influx of younger populations if the housing becomes more available due to older generations moving. This could result in rejuvenation of these metros, potentially attracting businesses and investments that cater to a younger demographic.

On the flip side, there's a risk of these areas becoming less diverse in age, which can have long-term implications for community services, local governance and cultural dynamics. It's essential to monitor these trends to understand the potential for transformative demographic shifts that can alter the fabric of these communities over time.

New listings are rising fastest in metros where more homes are owned outright, without a mortgage

• Pittsburgh, Buffalo and Cleveland have the highest share of homeowners free from mortgage rate lock-in among the 50 largest U.S. metros. 
• Seventeen percent of baby boomer homeowners are free from rate lock — the generation least affected – compared to just six percent of millennial owners. 
• Gen Z, whose members generally have less equity in their homes, will likely stay put for a while. 

SEATTLE, April 8, 2024 /PRNewswire/ -- New research from Zillow^® shows older homeowners and those in less expensive metros are the least likely to be discouraged from moving by today's higher mortgage rates – with Boomer homeowners in Pittsburgh leading the way. About 10.8 million current homeowners nationwide, or 13%, should be immune to the effects of high interest rates. Markets with more homeowners free from rate lock have seen more homes listed for sale, giving buyers more choices during a prolonged shortage of inventory.  

Many homeowners have a mortgage rate below the prevailing rate or an income too low to comfortably afford a mortgage at today's higher rates, and are therefore "rate locked" — financially incentivized to keep their current home and low rate. 

However, census data shows that 10.8 million homeowners are both mortgage-free and make enough income to afford monthly payments on a typical home where they live, if they bought it today. These homeowners are likely to be older and live in more affordable markets. Nearly 38% of Boomer homeowners in Pittsburgh are free from rate lock, making them the least locked-in of all generations of homeowners among the 50 largest U.S. metros. 

"The so-called mortgage rate lock-in effect has seriously curtailed both home sales and inventory over the past two years. Homeowners are more free to sell in less expensive areas — bringing more resale inventory into the market and facilitating sales," said Orphe Divounguy, Zillow senior economist. "Massive appreciation has left homeowners with record levels of equity, and many are financially able to move on, even given today's higher rates."

Rate lock has shown signs of easing in recent months, but the flow of listings is still significantly below pre-pandemic rates, and total inventory is in an even bigger hole, down roughly 37% compared to 2019. 

Mortgage rates' drastic shift is behind many homeowners' reticence to list. Rates reached record lows in 2020 and 2021, doubled in 2022, hit 23-year highs in 2023, and have remained elevated ever since. New research from the Federal Housing Finance Agency shows that mortgage rate lock-in prevented roughly 1.33 million sales between the second quarter of 2022 and 2023 year-end. 

Owners in more affordable markets face lower barriers to entry for their next home, generally have less mortgage debt, and can more easily move on — with or without taking on a new mortgage. The share of owners free of rate lock is highest in relatively affordable markets in the Upper Midwest — Pittsburgh, Buffalo and Cleveland — the latter two of which are among Zillow's Hottest Markets for 2024.

It's harder to give up a low rate and more expensive to move in the least affordable markets, so there tends to be fewer new listings of existing homes coming on the market in these areas. Zillow data shows a clear positive correlation between the share of homeowners without a mortgage and the change in new listings since early 2022, when rates rose. Metros with a higher share of locked-in homeowners saw larger decreases in new listings. 

Baby boomers are least affected by rate lock, while millennials and Gen Zers are significantly more so. Older homeowners tend to have more equity built up in their home and boomers have the highest incomes, on average, among current generations. Higher wealth and higher incomes make a cash purchase or higher down payment for their next home (in their market) more doable, and mortgage payments less onerous. Nationwide, 17% of baby boomer homeowners are free from the effects of rate lock, compared to just six percent of millennial homeowners and 12% percent of Gen X homeowners. 

Selling options for homeowners
Homeowners have benefited from the massive rise in home values, now up 41% over the course of the pandemic. Those ready to cash out and move on can explore different selling options upfront and decide the best course of action for them, whether selling with a Zillow Premier Agent or getting a cash offer from Opendoor.

The Silent Generation and boomers are least likely to be affected by changes In mortgage rates
Generation	Total Homeowners	Mortgage-Free Homeowners	Mortgage-Free and Mortgage-Ready Homeowners	Percentage Free of Rate Lock-In
Silent Gen	8,780,278	6,685,928	1,249,895	14 %
Boomers	32,061,195	17,430,503	5,305,625	17 %
Gen X	24,784,630	6,884,541	3,018,890	12 %
Millennials	17,627,307	3,202,861	1,127,771	6 %
Gen Z	1,273,088	332,842	48,434	4 %

 

Metros where homeowners are least likely to be affected by changes In mortgage rates
MSA	Total Homeowners	Mortgage-Free Homeowners	Mortgage-Free and Mortgage-Ready Homeowners	Percentage Free of Rate Lock-In
Pittsburgh, PA	699,477	341,063	188,486	27 %
Buffalo, NY	332,770	160,048	76,078	23 %
Cleveland, OH	561,134	241,587	123,707	22 %
Oklahoma City, OK	344,916	143,428	70,763	21 %
Detroit, MI	1,227,113	524,087	239,813	20 %

 

Metros where homeowners are most likely to be affected by changes in mortgage rates
MSA	Total Homeowners	Mortgage-Free Homeowners	Mortgage-Free and Mortgage-Ready Homeowners	Percentage Free of Rate Lock-In
San Diego, CA	641,052	201,114	18,315	3 %
San Jose, CA	357,221	125,670	10,848	3 %
Los Angeles, CA	2,161,234	731,526	67,755	3 %
San Francisco, CA	914,825	320,039	30,978	3 %
Seattle, WA	964,005	298,755	44,584	5 %

 

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SOURCE Zillow

What does the latest Zillow research reveal about homeowners in Pittsburgh, Buffalo, and Cleveland?

The research shows that these cities have the highest percentage of homeowners without mortgages among the top 50 U.S. metros.

Which generation is least affected by rate lock according to the Zillow research?

Baby boomers are the least affected, with 17% being mortgage-free compared to 6% of millennials.

What is the trend for Gen Z homeowners with lower home equity?

Gen Z homeowners are likely to stay put due to their lower home equity.

How are older homeowners and those in less expensive metros reacting to higher mortgage rates?

They are the least likely to be discouraged from moving by today's higher mortgage rates.

Which city's Boomer homeowners are leading the way in resilience against high mortgage rates?

Boomer homeowners in Pittsburgh are showing resilience against high mortgage rates.