Prevailing wisdom has told us that Americans will continue to stay in their homes as long as the interest rate remains high. The theory goes that a homeowner who is paying down a loan with an interest rate of around 3% will have no appetite to buy a different home and then be locked in to paying down a new loan with a rate that is more than double. The phenomenon has been dubbed the “Golden Handcuffs” and at its core, it asserts that the reason there are so few houses on the market is inherently because of monetary incentives.

While it’s true that favorable rates play a role in many people’s decision not to move, I have long suspected that it remains simply one factor among many and may not be as vital a factor as is claimed. With the recent announcement that the Federal Reserve is lowering interest rates, mortgage rates are destined to follow suit and we may finally have a chance to observe just how powerful the role of mortgage rates are in causing such a dearth of inventory.

I just don’t see it having such a happy ending. With many of the homes in our community owned by a retiring population, we know that seniors would like to downsize but not at the expense of losing their community. This group has developed deep ties with their friends, neighbors and families. For so many, the only place they might consider moving to is a house that has a shorter walk to their synagogue.

If it were somehow possible to build a 100 unit “55 and over” apartment building on top (air rights) of some of our neighborhood shuls, they would sell out in a day. Think about how many homes such a project would bring to the market for new families looking to move in.

I don’t want to downplay the savings that would accrue to a new homeowner looking to purchase and the difference between a 5 or 6% rate and a 7% mortgage rate. Every dollar counts and a cut would certainly help bring some relief to what buyers must shell out in order to buy a house. But the reality is telling us a different story. An agent in our office put up a house for sale last week and the home, priced at $650,000, has been shown to over 70 buyers. Offers are pouring in well above the asking price. This tells us many things. The demand for homes is quite strong and whatever savings one may have hoped for with a lower interest rate will most likely be erased in the bidding wars that are bringing all time high prices. Buyers will do the math and calculate what their monthly costs will be, and if the rates are lower, they can now afford to bid higher and increase the chances that their bid will be selected. It also confirms that there are just not enough homes on the market to meet the demand.

It should be noted that as of the writing of this article there were 80 homes on the market in Teaneck, Bergenfield and New Milford combined, a number we have not seen since March of 2023. Every new home helps, but we are a far cry from the hundreds of homes that used to be for sale in these areas at any given time. Gone are the Sundays when I met with buyers Sunday morning to look at homes, took a break for lunch, and then reconvened at 1 p.m.. Fast forward to this past Sunday when I met with a buyer who drove to Teaneck from the North Shore of Long Island to look at two homes.

Nechama Polak is the broker of record and owner of V&N Group LLC, located at 1401 Palisade Avenue in Teaneck. Send your thoughts and comments to [email protected] or call 201 826 8809.