For more than two decades a buyer moving up to a pricier home would pay roughly $400 more to purchase a home that was 25% more expensive than the house the buyer sold.That gap is convincing many American homeowners to stay put, stunting the number of homes for sale and buoying prices on the paltry supply that exists.
A lateral move would mean shelling out 60% more each month, or about $804 more on average, ICE found. Take, for instance, two different homeowners with properties worth $300,000. Let's say both are trading up for a house that's worth $375,000, or 25% more than their current one. Homeowner A has $50,000 in home equity, which means he owes $250,000 on his current mortgage. Homeowner B has $150,000 in equity, owing $150,000 on her mortgage.
That sets the stage for bidding wars, sending prices higher — another disincentive for move-up buyers.