The Vanishing Act: Move-Up Buyers Disappear from the Housing Market

What Is a Move-Up Buyer?

A move-up buyer is a homeowner who sells their current property to purchase a larger, more expensive, or better-suited home. These buyers typically make this transition due to life changes such as growing families, career advancement, accumulated equity, or a desire for improved location and amenities. Historically, move-up buyers have been the lifeblood of the housing market, creating a natural flow: their existing homes become available for first-time buyers while they purchase mid-tier or luxury properties from sellers who may be downsizing.

This market segment has traditionally accounted for a significant portion of housing transactions. Before the recent market disruption, repeat buyers (which includes move-up buyers) maintained a relatively balanced relationship with first-time buyers in the marketplace. The health of the housing market depends on this circulation of properties between different buyer segments.

However, the dynamics have shifted dramatically. According to the National Association of REALTORS, repeat buyers now make up 79% of all home purchases, while first-time buyers have fallen to a record low of just 21%. This imbalance reveals a market where those who can buy are primarily those who already own homes and have built substantial equity, while potential first-time buyers struggle to enter.

The Lock-In Effect: Why Homeowners Are Staying Put

The primary force keeping move-up buyers on the sidelines is the mortgage rate lock-in effect. During the pandemic era, mortgage rates dropped to historic lows, with the 30-year fixed rate hitting 2.65% in January 2021. Millions of Americans either purchased homes or refinanced existing mortgages at these unprecedented rates. Now, with rates hovering near 6.8% according to Bankrate's research, selling and buying would mean trading a payment that may be half of what a new mortgage would cost.

The numbers tell a compelling story. According to the Federal Housing Finance Agency, 81% of all outstanding mortgages in the United States carry an interest rate below 6%, and 69% have rates at or below 5%. Nearly a quarter of all mortgages have rates under 3%. For these homeowners, the math simply does not work in favor of moving.

Consider a homeowner who purchased a $400,000 home in 2021 with a 3% mortgage rate. Their principal and interest payment runs approximately $1,686 per month. If they wanted to sell and purchase a similar-priced home at current rates of 6.8%, their new payment would jump to approximately $2,607, an increase of nearly $1,000 per month or about 55%. For a more expensive move-up purchase, the payment shock becomes even more severe.

Recent survey data from Bankrate reveals the psychological impact of this lock-in effect. A striking 54% of homeowners say there is no mortgage rate at which they would feel comfortable selling their home, up 12 percentage points from the previous year. Similarly, 51% say they would not feel comfortable buying another home at any rate. Only 3% would consider selling if rates remain at 6% or higher.

How the Frozen Market Affects Everyone

The disappearance of move-up buyers creates a cascading effect throughout the housing market. When a move-up buyer decides to stay in their current home, two transactions are eliminated: the sale of their existing home and the purchase of their next property. This dual impact explains why existing home sales have remained at historically low levels despite a strong overall economy and solid job market.

According to NAR data, existing home sales reached approximately 4.1 million units annually in recent months, well below the 5 to 6 million units that characterized a healthy pre-pandemic market. The National Association of REALTORS Chief Economist Lawrence Yun noted that home sales have operated at roughly 75% of normal activity for three consecutive years, even as the economy added millions of jobs.

The Inventory Paradox

Housing inventory has increased from its extreme pandemic-era lows. Currently, there are approximately 1.52 million homes for sale, representing about 4.4 months of supply. While this marks improvement from the sub-3-month supply seen in 2021 and 2022, it remains well below the 6 months typically considered a balanced market. More importantly, the composition of this inventory has changed.

Much of the inventory increase comes from homes sitting on the market longer rather than a flood of new listings. Homeowners who listed hoping for a quick sale are instead finding buyers scarce and cautious. Price reductions have become more common, with approximately 22% of listings experiencing price cuts compared to 17% a year earlier. Homes that once sold within days now sit for a median of 51 days nationally.

Regional Variations

The lock-in effect varies significantly by location. Markets that experienced the largest pandemic-era price increases and lowest rates face the most severe lock-in. California markets like San Jose show homeowners facing payment increases of nearly 180% if they were to sell and rebuy at current rates. Portland, Maine and Bridgeport, Connecticut also show gaps exceeding 145%.

Conversely, more affordable markets in the Midwest have experienced less dramatic lock-in effects. These areas, with lower price points and higher shares of assumable government-backed mortgages, have seen relatively better housing activity. The Midwest region has consistently outperformed in recent NAR reports, benefiting from more affordable housing stock and sufficient inventory.

The Changing Face of Home Buyers

The frozen move-up market has fundamentally altered who can buy homes. According to NAR's Profile of Home Buyers and Sellers, the typical home buyer demographics have shifted dramatically from historical norms.

First-time buyers, who historically comprised about 40% of the market, have fallen to just 21%. Their median age has climbed to 40 years old, a record high that compares starkly to first-time buyers in their late 20s during the 1980s. High rents, student loan debt, and unprecedented home prices have delayed homeownership by over a decade for many would-be buyers.

Repeat buyers now dominate the market at 79% of all purchases. Their median age has reached 62, the highest ever recorded, suggesting many are making retirement or lifestyle moves rather than traditional move-up purchases. Notably, 30% of repeat buyers pay all cash, leveraging home equity accumulated over years of ownership and avoiding the mortgage rate issue entirely.

All-cash purchases have hit record highs at 26% of all transactions. This concentration of buying power among those who already own property or have accumulated significant wealth has created what NAR economists describe as a tale of two markets: one for the equity-rich and another for everyone else struggling to gain entry.

Strategies for Move-Up Buyers Considering a Move

Despite the challenging environment, some homeowners find compelling reasons to make a move. Life events such as job relocations, growing families, divorce, or retirement do not wait for favorable interest rate environments. For those who need or want to move, several strategies can help minimize the financial impact.

Working With the Right Agent

In this complex market, working with an experienced real estate agent becomes even more critical. A skilled agent can help you understand local market conditions, identify properties where sellers may be motivated to negotiate, and structure offers that maximize your leverage. They can also connect you with lenders offering competitive rates or creative financing options.

According to NAR data, 88% of buyers and 91% of sellers worked with a real estate agent this year. For-sale-by-owner transactions hit a record low of just 5%, suggesting that professional guidance has become more valuable as market complexity has increased. Agents who understand both the challenges facing move-up buyers and the strategies to overcome them provide essential value in navigating this environment.

Looking Ahead: What Could Unlock Move-Up Buyers?

Several factors could eventually release some of the lock-in effect and bring move-up buyers back to the market. Understanding these potential catalysts helps homeowners plan for when conditions might improve.

Interest Rate Trends

Most forecasters expect mortgage rates to remain elevated through 2025, with the 30-year fixed rate likely staying above 6% for the foreseeable future. However, a meaningful decline toward 5% or below could begin unlocking the market. According to Bankrate surveys, 37% of homeowners say rates would need to fall below 5% for them to consider buying, while only 3% would move at 6% or higher.

The Federal Reserve's monetary policy decisions will influence this trajectory. While rate cuts have begun, persistent inflation above the Fed's 2% target has limited how aggressively they can reduce rates. Economic forecasters suggest meaningful mortgage rate relief may not arrive until late 2025 or 2026.

Time and Life Changes

As researchers note, the lock-in effect will gradually diminish as life circumstances override financial calculations. Job changes, family growth, divorce, health issues, and retirement will continue forcing some homeowners to move regardless of rate environment. Additionally, as years pass, the total interest savings from a low rate become less significant as loan balances decline through regular payments.

Demographic shifts may also play a role. Baby boomers, who represent the largest share of both buyers and sellers, will increasingly need to downsize or access home equity for retirement. Their selling activity could add significant inventory over the coming years, even if it means giving up favorable rates.

Market Adjustments

Some experts suggest that home prices may need to adjust to restore affordability. While a crash appears unlikely given the supply constraints and strong homeowner equity positions, slower appreciation or modest price declines in some markets could help. If prices stagnate while incomes grow, affordability gradually improves. Markets in the Sun Belt and parts of the West have already seen some price softening as inventory has increased.

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