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Dr. Bob Wood on why so many Americans feel trapped in their homes by their low-rate mortgages

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Posted on August 1, 2023 by MCOB Outreach

MCOB Outreach

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MCOB Professor Dr. Bob Wood was recently featured on CNBC for his article on 'Why so many Americans feel trapped in their homes by their low-rate mortgages.'

 

Dr. Bob Wood a professor of Economics, Finance & Real Estate gave his take on the matter in hand.

 

An extract from the article is as follows;

 

Bob Wood, 66, has been thinking of selling his home in Mobile, Alabama. The finance professor and his wife, Terri, purchased the 5,000-square-foot house with a pool nearly a decade ago. 鈥淚t鈥檚 probably time to downsize,鈥� he said. They would also like to be closer to their grandchildren in Tennessee.

And yet, 鈥渨e are in the 10th year of a 3.125% 15-year fixed mortgage,鈥� he said. They don鈥檛 want to move now and give up that low rate to buy at a higher rate.

鈥淲e just don鈥檛 want to pay that much in interest.鈥�

 

Wood is among 鈥渁 stock of people sitting on very cheap mortgages,鈥� said Tomas Philipson, a professor of public policy studies at the University of Chicago and former acting chair of the White House Council of Economic Advisers. 

Those 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. For them, opting not to move is 鈥渢he right strategy.鈥�

With home prices and interest rates on the rise, 鈥渢he consumer is best advised to stay put,鈥� Philipson said.

 

You can read the full article .

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