What impact are "golden handcuffs" having on your mobility program?

While there are many things impacting your mobility programs, we continue to hear that job seekers are struggling more now than ever to accept a job offer where they have to relocate. It’s actually been happening over time, and you can see the change in the number of job seekers moving for work has fallen to a record low of 1.6% due to a confluence of factors that include dual-career issues, housing challenges, mortgage rates, and remote work.

“Golden handcuffs” are preventing many from considering a move. According to this Fortune article, the term originated in the late 70's as a way to explain why ambitious professionals were choosing to stay put rather than explore other employment options. The reason was that their employers were spoiling them with generous above-market compensation—including stock options—and benefits. 

Today, roughly 4 in 5 homeowners with mortgages have an interest rate below 5%, and nearly one-quarter have a rate below 3%. With rates now pushing above 7%, many homeowners aren’t moving, which is intensifying a shortage of homes for sale. Nearly 82% of homeowners feel “locked-in” by their existing low-rate mortgage, according to data from Realtor.com and the shortage of homes is continuing to push prices up further, albeit not at the same rate as has been seen the last 2 years.

The reality is that many 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. To say it is a "seller's market" still is an understatement. Here are home seller expectations in the current "shifting" market:

• 43% expect to get their asking price (up from 27% in 2022)
• 37% expect to have an offer within a week (compared to 33% in 2022)
• 35% expect buyers to be willing to forgo contingencies like inspections and appraisals to make the deal (compared to 30% in 2022)
• 34% expect an all-cash offer (up from 22% in 2022)
• 31% expect to get more than their asking price (compared to 30% in 2022)
• 27% expect a bidding war to take place (compared to 32% in 2022)

The outlook is that this could take some time to work out of as the lack of homes coming onto the market has a dramatic impact, keeping options for buyers limited and prices high. If this is hard on buyers, it is also hard on real estate agents and mortgage brokers, since refinance markets (due to higher rates) have also plummeted. 

Average U.S. mortgage rates have surged to 7.1% per Freddie Mac’s latest data - a level that has not been reached in over 20 years. These high mortgage payments, coupled with the large number of present homeowners that have ultra-low interest rates have caused a plunge in sales, 19% down in June 2023 versus June 2022. 

For many, this is creating affordability challenges. However, Drew Lightowler, President of Plus Relocation Mortgage reminds us, “Despite the slowdown in sales, due to low inventory, we are continuing to see about a 6% increase in home appreciation and multiple bids on 35% of all home purchases. The people looking to purchase now are doing so in anticipation of rates moving down over the next year and wanting to purchase prior to home values continuing to rise.” 

If you're interested in more related to real estate trends and predictions, join us for our next Spotlight webinar on September 12^th with Kathy Connelly, COO of Berkshire Hathaway HomeServices Georgia Properties. She’ll share her 30+ years of experience and help us make sense of what has happened and where things are going. Register here!