THe New York Times
Feeling Mortgage-Rate Envy? You’re Not Alone.
Ronda Kaysen – August 4, 2023
At a rooftop party on a steamy July night in Philadelphia, the margarita machine was churning, the seafood boil was hearty, and the conversation turned to the default of the upwardly mobile: real estate.
Almost anyone shopping for a home in the 2020s knows the script by now: Someone mentions their recent home purchase, a tale undoubtedly rich with drama, stress and suspense. Guests, well schooled in the volatility of the housing market, lean in for the follow-up: When did you buy?
The response to that key question “is normally followed by an ‘Oooh,’” said Evan Barker, 36, a lawyer who attended the party and has participated in enough of these exchanges to know that the “Oooh” means one of two things: You either got the interest rate of a lifetime, or you squarely did not.
Fortunately for Barker, he falls into the former category. He and his wife, Laura Gallagher, 36, bought their first house in Bryn Mawr, Pennsylvania, in the early spring of 2020, weeks before home prices began their fastest ascent in U.S. history, as mortgage rates plummeted to historic lows. In January 2021, the 30-year mortgage rate bottomed out at 2.65%, a few months before Barker and Gallagher refinanced, besting the national average with a rate of 2.375%.
So it’s no wonder that Barker spent the evening enjoying the banter almost as much as the stunning City Center rooftop views. He knew his lines for this dialogue. He had spent months fine-tuning his delivery, usually waiting for someone else to toss out an enviable interest rate before he topped it.
“I throw the humblebrag in,” he said. “Hey! Best financial decision of my life was pure luck. It’s just that simple.”
While most of the guests spent the conversation one-upping each other, the person who stood out to Barker was the one who had bought recently, at a substantially higher interest rate than everyone else. “They shocked us with some of their payment info,” he said.
American homeowners now stand on two sides of a divide. On one side are those who had the good fortune to buy or refinance between 2020 and early 2022, and now enjoy notably low monthly interest payments on their principal. On the other side: everyone else.
These prospective and recent homebuyers are watching their purchasing power diminish as home prices hold steady amid rising rates. In mid July, the 30-year mortgage rate hovered just under 7%, after reaching a high of 7.08% in October. The last time rates exceeded 7% was in 2002 — more than 20 years ago.
The contrast creates ideal conditions for ribbing from the winners and resentment from the losers. Homeowners and buyers say the sparring has been happening among friends at parties, with colleagues at the office, and on social media, where it plays out as memes that are smug, shocked or hopeless, depending on where you fall on the spectrum.
“There is almost a cross-generational envy,” said Övül Sezer, an assistant professor of management and organizations at Cornell University, who studies humblebragging.
Flaunting wealth and good fortune is nothing new. But Americans, for the most part, avoid sharing specifics about money. Sure, you’ll plaster news about your promotion on Facebook and on the platform formerly known as Twitter, but you’ll probably keep mum about the salary package that comes with it. When it comes to real estate, the attitude is no different. A gleeful homeowner may gloat about vanquishing the competition in a bidding war, but they won’t mention the sale price, or their monthly payments.
In comes the interest rate, serving as the ideal proxy. Share your mortgage rate and you can showcase your financial prowess without revealing how much money you spent (or how much you have). It almost feels humble. Almost.
“When we brag, we signal our competence,” Sezer said — telling the world, in this case, that we’re savvy consumers. “Yet we also know that bragging is kind of bad, so humblebragging is this seemingly sweet spot. It allows us to both brag, but also look humble.”
Few people are fooled.
“It’s like a talking point. We get it, we know, yes, yes — everybody has 2.6%, you’re all so smart, thanks for informing me,” said Ike Wachuku, 34, a software engineer in Baltimore, who will not be getting a 2.6% interest rate if he and his wife ever manage to find a new house. “People are rubbing your face in it.”
Consumers have little control over what mortgage rate they get, aside from maintaining a solid credit rating. Mortgage rates have been rising in response to the Federal Reserve’s continued efforts to wrestle inflation under control. So timing, not skill, dictates the rate — and timing is a byproduct of luck.
As it happens, luck isn’t entirely random. The pandemic exacerbated inequalities that existed before 2020. For many wealthier Americans, the pandemic was a financial boon. They kept their jobs, were able to work remotely, enjoyed bonuses and raises, and had cash on hand when interest rates plummeted to keep the economy afloat. They were the ones best positioned to pluck up homes, driving up prices. The people who spent 2020 and 2021 struggling through job losses, illnesses or other financial hardships likely missed out on the moment, and are now the ones enduring the hard consequences of rampant inflation.
The interest rate cut “was this free handout to people who didn’t really need it,” said Daryl Fairweather, the chief economist at Redfin. For everyone else, “that door closed as soon as people started to get back on their feet.”
Or as Sharon Reshef, who last month bought a $400,000 one-bedroom apartment in Washington D.C., put it: “It’s really hard to plan your life around macroeconomics.”
That hasn’t stopped some of her slightly older colleagues in Sen. Kirsten Gillibrand’s office from teasing her about her 6.625% interest rate.
“It’s just a gentle ribbing,” said Reshef, 30, the research director for the senator from New York, who now spends half of her take-home pay on her mortgage. “But as long as we’re here, I will say that not a lot of people in my cohort own property, especially as a single person. Regardless of the interest rate, I have that one up on them. I can definitely brag.”
In hindsight, Scott Decker, 35, wishes he had been ready to leave Brooklyn for the suburbs in 2021, when many of his friends were leaving. Instead, he and his wife, Maureen Decker, bought a home in Montclair, New Jersey, the following year. Now, when he drives his son to preschool, passing the stately homes on picturesque, tree-lined streets, he plays a tortured game.
“I’m like, ‘I wonder what this house sold for?’ And, ‘We could have gotten this house two years ago if we had wanted it,’” he said. “I’m definitely always thinking about that and always a little jealous.”
Decker, who leads strategic media planning for a tech company, “definitely overpaid” for the four-bedroom house that he and Decker bought for $1.1 million, 40% over the list price. They also took out an adjustable-rate mortgage, with a rate that is fixed at 4.15% until 2030, when it adjusts based on the current rates. “I’m terrified at what I may be forced to change to in the future,” he said.
The Deckers are friendly with another Montclair couple who own a bigger house, but because their interest rate is lower, their monthly payments are about the same. “Every time we go to their house, I’m like, ‘Man, this is unfair,’” Decker said.
Talk to anyone who managed to buy a home in 2020 or 2021, and they will probably tell you the competition was fierce and the experience miserable. But buyers today face similar, if not tougher, conditions. Inventory is anemic, partly because homeowners do not want to part with their low interest rates. So far, a scant 1% of American homes have traded hands this year, the lowest rate in a decade, according to a July report from Redfin.
Of course, things could be worse. In 1981, mortgage rates peaked at a jaw-dropping 18.53%. Still, the average home price in the second quarter of 1981 was $84,300 — even adjusted for inflation, that’s about $287,020, which is far less than the average price of $495,100 in the second quarter of 2023.
But people who remember the days of double-digit interest rates are often quick to remind younger generations that they, too, walked to school uphill both ways in the snow.
“The fate, the gods, determine when you enter that phase of your life and what is happening in the market,” said Allen J. Palmer, 85, who is retired from IBM and bought his house in what is now Silicon Valley, in California, in 1977 for $95,000 (or $480,686 in today’s dollars), with an 8.5% mortgage interest rate. The first year he and his wife spent in that house, they couldn’t afford to fly home to Milwaukee for the holidays.
Young buyers “don’t understand that this is the way it is,” he said. “They probably don’t remember that their parents struggled to pay” the mortgage, too.
On a recent TikTok video, Barbara Corcoran, the 74-year-old real estate mogul, arranged fresh flowers as she chided hesitant buyers for their reluctance to get back into the market — a common refrain among real estate agents, who insist that there is no time like the present to buy a house.
“Pick your poison: high interest rates now, which aren’t so high, or super-high prices once they come down,” Corcoran said, her hand grazing a fern frond. “Your choice.”
Decker, in Montclair, knows which choice he thinks buyers should make. Recently, he was standing at the bar of a local barbecue restaurant and overheard another patron who seemed overconfident about a recent lowball offer he had made on a house in town. Decker had lost enough bidding wars to know how this story would end, and considered schooling him on his grim prospects. Maybe he would lean across the bar, he thought, and say, “Don’t even bother, man, cool your heels somewhere else.” But he hesitated.
“It did make me feel a little good,” he said, “and certainly thankful that I have a place to live and I’m not dealing with that right now.”
Instead of offering unsolicited advice, he ordered a Pabst Blue Ribbon and a shot of Jameson, and walked back to the patio to sit down and enjoy the evening with his family in their new town.