Marketplace - Can we break out of the mortgage lock-in effect?

Episode Date: February 19, 2024

It’s a tough time to be a first-time buyer in the housing market. But it’s also tricky if you own a home and are looking to buy a new one, because your mortgage rate could roughly double. That “lock-in effect” is keeping housing inventory low and pushing prices higher. Then, we’ll examine why shipping costs are falling despite global disruptions and hear how steakhouses are trying to rebrand themselves.

We've got a sampler platter of stories today about housing and supply chains and steak. From American Public Media, this is Marketplace. In New York, I'm Kristen Schwab, in for Kyra's Doll. It's Monday, the 19th of February. Thanks for being here. These are challenging times if you're at the point in your life where you want to buy a home. Whether you're a renter looking to buy your first house, or an owner who's looking to move but is locked into a nice, low, three-point-something percent mortgage you got a few years ago. Because now you're looking at a mortgage that's double that, something like six and a half percent. That mortgage rate jump has put the market

at a bit of a standstill because it incentivizes homeowners to stay put, which keeps the inventory of homes for sale low. Marketplace's Mitchell Hartman reports on how these conditions are driving home prices higher. The National Association of Realtors reports that home prices climbed 3.5% on an annual basis in the fourth quarter of last year to a national median price of $391,700. The cost of the monthly mortgage payment on that home rose 10%. After peaking last summer, mortgage rates have fallen, says Jessica Lautz at the National Association of Realtors. As interest rates come down, buyers come into the home buying market once again.

But, she says, They are encountering an environment with extremely limited housing inventory that pushes home prices up as bidding wars start happening again. It's very tough, especially for first-time homebuyers who do not have housing equity. And who, as a result, are likely to be left paying rent for now. Which, by the way, is about 20% more expensive than before the pandemic. Responding to that stressed rental market, online real estate firm Zillow just launched a new service. It now lists individual rooms for rent in homes, townhouses, and apartment buildings, says senior manager Lily Ferguson.

Costs can be a constraint, especially in expensive markets in major metropolitan areas. A renter might be able to now live in a house with a yard or a neighborhood that would have been previously out of reach if renting on their own. A homeowner might take on a renter to help pay their mortgage. A group of roommates could lease their spare room to lower each tenant's monthly rent payment. In the long run, falling interest rates for mortgages and bank loans will be key, says Robert Dietz at the National Association of Home Builders. We could see lower rates for financing home construction and land development. The most effective long-run way to tame shelter inflation is to build more affordable, attainable housing. Housing of every kind, he says, for sale, for rent, single-family, and multifamily.

I'm Mitchell Hartman for Marketplace. Wall Street was closed for the holiday. We'll go overseas when we do the numbers. The words supply chain might trigger a bit of anxiety for anyone who tried to buy a car or a couch or just listened to us talk about it on the show a couple years ago. Those words have been coming back to haunt us over the past few months because of problems at two of the world's most important shipping lanes that we've told you about. The Red Sea, where Houthi rebels have been attacking shipping, and the Panama Canal, where low water levels are limiting the number of ships that can pass through.

Panama Canal, where low water levels are limiting the number of ships that can pass through. These disruptions have caused big delays and have sent shipping container rates soaring. Still, despite these ongoing problems, supply chains have started to settle down. Marketplace's Justin Ho looked into what's taking the edge off the disruption. The cost of container freight rose throughout January, according to the supply chain advisory firm Drury. But in the last couple weeks, container shipping costs have started to tick down, says Simon Heaney, Drury's senior manager of container research. You see that that's being driven by decreases in the Asia to Europe trade lane. In other words, the trade lane that's most affected by the Red Sea disruption.

Heaney says part of the recent decrease in shipping costs was because of the Lunar New Year earlier this month. Factories in Asia tend to shut down around that time. But even as they kick back into gear, Heaney says shipping costs could keep falling, in large part because shipping companies are avoiding the Red Sea. There's an understanding that, yes, there will be additional time in terms of transporting cargo from Asia to Europe, but the scheduling is about to adjust to cater for those additional delays. Since shipping companies have to go the long way around Africa to avoid the Red Sea, they've been adding additional vessels to those routes to reduce delays,

says Judah Levine at the logistics company Freydos. So when you have those smoother operations, you're not having missed departures and loaded containers building up into ports and then competing to get on the space of the next vessel. Levine says deploying all of those new ships isn't exactly cheap. Neither is the extra fuel spent traveling around Africa. But the added capacity takes a lot of risk

and uncertainty out of shipping. And that can take the edge off shipping prices. Compared to how high we've seen them get in the last few weeks, we're expecting them to come down. Meanwhile, the links in the supply chain that don't involve ocean freight are doing just fine, says Katie Russ, an economics professor at UC Davis. For instance, ports have plenty of capacity and are able to more or less manage this rerouting of ships to a large degree. Russ says that's why the recent shipping disruptions are nowhere near as bad as what we saw early in the pandemic. I'm Justin Ho for Marketplace. I ate at a steakhouse last week for the first time in forever. It was a special occasion. And you might assume I ordered a steak. I did. But that's not everyone's go-to order anymore.

I ordered a steak. I did. But that's not everyone's go-to order anymore. Apparently, eating steak at steakhouses is much less common these days. There are a bunch of reasons for that. Eating out has gotten more expensive, so has beef, and people are eating less red meat for dietary and environmental reasons. It means steakhouses have had to make some adjustments to appeal to diners who might prefer, say, salmon. Alina Dizik wrote a piece for the Wall Street Journal about this. Alina, welcome to the show. Thanks for having me. So my first thought after reading this was, you know, there are so many places for people to spend their money for a night out. If they're no longer going to steakhouses for steak,

why are they going there? If they're no longer going to steakhouses for steak, why are they going there? That's a great question. I really think that people like the vibe of these steakhouses. So they still like to be, you know, maybe dress up and, you know, sit in a booth or, you know, have this really great martini. So they still enjoy the ambiance of dining out at a steakhouse. Yeah, part of the ambiance, you talk about that. Also, we talked about the health preferences and prices. So what are restaurant owners doing to adapt to these new food choices and also just that that kind of party atmosphere? So the restaurants that I spoke to, they said that they're making it easier for some of the diners to split a steak that may have in the past just been an entree for one person. And

they're also kind of allowing these steakhouses to become almost like lounges as the night progresses. So I know that there's selfie mirrors and some encouraging people to take selfies and just the ability to just hang out and order drinks after dinner. They're really trying to accommodate a wider group of people. Yeah, I thought it was interesting. Actually, one of the women you talked to, she's not a drinker. And so it sounds like, you know, it seems like with less people drinking, you can almost kind of replace that sort of night out with a long, long luxurious dinner. Yes, some of the people I talked to, including one woman in Chicago, said that she doesn't really drink and she doesn't really eat steak,

but she loves to go to the steakhouses for the atmosphere because it's always so celebratory and she can linger there with her friends and, you know, hang out and still feel like she, you know, has had a night out. You know, you're talking about steakhouses being a celebratory place. The other way I think of them as a place where men do business, and I'm kind of wondering if this shift away from steak is about more women having a seat at the table. Had to use that pun. And also if it says something about whether the business world's expectations of men and what they're supposed to eat at a business dinner have changed? I think that you're definitely onto something in terms of these being originally places where men do business and how that's shifting to make it more hospitable for women. And some of the people I spoke to talked about more inclusive decor and lunch options that really focus on vegetarian options. And they have for a long time been trying to include women in what they're offering.

But it does seem like a bigger shift for both men and women away from, you know, just steak and especially for men, just the expectation, I think, to order the steak. Right. Okay, so picture yourself. It's Friday night. You are getting dressed up. You're going out with friends. You're going to a steakhouse. What's the mood? What are you ordering at the table?

So if I'm going to a steakhouse with friends, I think I would order what the people in my story are ordering. Seafood, salads, I would probably steal a piece of steak from whoever ordered the steak, but I would stay away from ordering it myself. I am that person. Convince somebody else to get a bite, to get what you want so you can have a bite. That's right. That's right. I really feel like I can only have a bite because if it's a late dinner, I still want to have a good night's sleep. And so I feel like that's easier done with seafood. Yeah. Alina Dizik wrote a story for The Wall Street Journal about how steak houses are changing. Alina, thanks for chatting. Thank you. Thanks for having me. We spend a good amount of time on this show combing through the weekly unemployment numbers and the monthly jobs report to get a sense of what's happening in the economy.

But a lot of stories can't be told through numbers alone, because some career transitions have nothing to do with economic headlines. They're about something more personal. That's the topic of today's installment of My Economy. My name is Grace Kim. I'm in Longmeadow, Massachusetts, and I am a data scientist. data scientist. My career has been a winding road with ups and downs. I worked as a climate researcher for a while because I have always been interested in the planet. I grew up in Los Angeles going to the beach and I was just fascinated by the oceans, the vastness of it, kind of how big it all is and how all the processes happen on a planetary scale. I studied to become a climate researcher. I got my PhD in oceanography.

After graduation, I got a postdoctoral fellowship to work at NASA Goddard Space Flight Center to continue in my career as a research scientist. It was near the end of my funding term at my position. my position. And I realized kind of the next step for me was going to potentially involve some large changes in my life. I was also experiencing some challenges in my personal life. My dad had a terminal diagnosis. Additionally, I got married and I found out that we were going to have our first child. And there was just so much going on in my personal life that I didn't feel I could pick up and go. Very soon after I had my first child, that was the moment that I realized that there are other opportunities available. When it came time for me to think about what jobs could be applicable to the skill set, the core skill set that I had, data science kind of popped out at me.

kind of popped out at me. I do miss being a climate researcher, but thankfully I don't feel too far removed from it. There's no one way to get from A to B. You might not end up where you dreamed you would be as a child, but yeah, I don't know. It's an adventure. That's Grace Kim from Longmeadow, Massachusetts. Tell us what's going on in your economy at marketplace.org slash my economy. Coming up. I wasn't earning enough to start paying off my student loan. A familiar feeling not just here, but also in the UK. But first, let's do the numbers. U.S. markets were closed today. The big day for traders is on Wednesday, with the release of the Federal Reserve Minutes from January's

meeting. As you know, there was no interest rate cut last month, but plenty of questions for Chair Powell's presser about when that cut might happen. The next Fed meeting is March 19th and 20th. Powell had said already that a rate cut in March is not likely, and that was before the inflation data last week. In the meantime, let's go overseas. Japan's Nikkei was basically flat. Britain's FTSE stepped up 0.2%, and Germany's DAX lost 0.1%. You're listening to Marketplace.

This is Marketplace. I'm Kristen Schwab. Today is a federal holiday, which means those bright yellow buses that shuttle kids to and from school have the day off. But the next time you spot one on the road, take a closer look. You might not find a diesel exhaust pipe because more school buses are going electric. You might not find a diesel exhaust pipe because more school buses are going electric. The Environmental Protection Agency is sending nearly 5,000 electric buses to schools. It's called the Clean School Bus Program, and it's funded by the bipartisan infrastructure law that Congress passed a few years ago. Since the federal government is footing the bill, participating was a no-brainer for many districts. Harvest Public Media's Kate Grumke reports.

Elementary school kids dash through cold rain toward idling buses as school lets out in the Rawls County School District in northeast Missouri. About 800 students attend this rural district. It has a fleet of 17 buses. They all look like your standard yellow school bus, but two of them are powered by batteries. This school district is one of the first in Missouri to get electric buses from the federal infrastructure law funding. Ninth grader Ian Joyner is on board. His dad is actually one of the drivers.

He's noticed this bus is different. It's not as loud as the other ones, but it's definitely fun to ride this bus. Ian takes a seat as the dispatch gives drivers the all-clear to start drop-off. All right, drivers, have a safe trip. The EPA program has funded $1.8 billion of clean buses so far. In the next five years, that number is going to go up to $5 billion. Without that money, many school district officials say they wouldn't have purchased these vehicles. Mostly because they're super expensive. A new electric school bus can cost about $350,000.

That's more than triple the cost of a new diesel bus. Plus, districts have to install expensive charging infrastructure. Schools will save on cost per mile and bus maintenance over time. But still, that doesn't make up for that high price tag. The bipartisan infrastructure law was really a game changer. Sue Gander directs the electric school bus initiative at the World Resources Institute. She says we're still in the early days of this technology. As manufacturing scales, she expects bus prices to come down. A lot of that is driven by the prices of batteries, and we know that the prices of batteries are coming down.

In Missouri, Rawls County School District Transportation Supervisor Eric Joyner drives one of the electric buses through a typical route. On gravel roads between expansive farm fields. He kind of nerds out over these buses. I think it's fun. I like driving a school bus better than my own personal vehicle. There are other upsides. Zero emissions means fewer greenhouse gases and also better air quality for school kids. Still, Joyner gets what some call range anxiety on his long rural routes. One time his battery sunk down to 8%. So when you start getting that low, you start to kind of panic a little bit, especially when you got kids on board.

Once stayed over in Iowa, the Coon Rapids Baird School District just got a new electric school bus last month. I like the fact that it's quiet. Eric Traeger is superintendent of the small rural school district in west-central Iowa. It does the job that it's supposed to do. At first, Traeger says some members of his school board weren't sure about the electric buses. But, you know, beyond the politics of it and the personal opinions, it's a free bus, right? Free bus. He says it's as simple as that. In Rawls County, Missouri, I'm Kate Grumke for Marketplace. The number of workers in the U.S. that went on strike in 2023 more than doubled from the year before.

That's according to a report from the Labor Action Tracker, a collaboration from researchers at Cornell and the University of Illinois. And we're not the only country that's seen an uptick in labor disputes. Last year in the U.K., train drivers, postal workers and teachers walked off the job. Last year in the UK, train drivers, postal workers and teachers walked off the job. And this coming Saturday, thousands of doctors who work for the National Health Service, that's England's publicly funded health care system, they're going on strike again over pay. The BBC's Elizabeth Hodgson has more. The National Health Service in the UK is famous around the world for being free at the point of delivery.

It's funded through general taxation, and although you can pay to be treated privately, most Brits still rely on and value the NHS, including US-born actor Rob Delaney, who lives in London. He's been supporting the doctor's strikes. I love the NHS, and I love its workers, and my family's benefited massively from it. Most of my life was spent getting health care in the United States, you know, with a really horrible barrier of private health insurance

in between me and my family's care. British doctors are angry they're being made to work long hours for what they say is inadequate pay. Dr Kirsten Selleck, a striking medical resident, explains why. I wasn't earning enough to start paying off my student loan. I didn't reach the minimum threshold to pay off my student loan. That's how little I learn as a 40-hour-a-week doctor, which is part-time. Pay does increase the more years of training you complete.

But even when you're at consultant or attending level, you'll still only earn an average of $180,000 a year. That's far less than in the United States, in some cases under half the pay of equivalent US doctors. Dr Shirin Ahmed is from the UK, but now lives and works in America. Hey friends, it's Shirin, aka Halal Girl New York, and welcome back to the channel. On her YouTube channel, Dr Ahmed talks about the salary differences. In the US, the average length of a residency programme is around three to five years, whereas in the UK, when you finish medical school, the average length of training for a junior doctor is between five to ten years. Even as consultants, she says they make two or three times less than they would in the US.

But the UK government says NHS doctors aren't being reasonable. Here, it's taxpayers who are paying the wages. The government points out medical residents have already received an average pay rise of 9% this financial year. They're now offering them a further 3%. The doctors aren't happy. Some are now turning their sights to Canada. Take a journey to a place outside the ordinary, to Canada.

Canada has a similar free-to-all health system, publicly funded by the federal government and partly by each local province. Phil Martin, who's based in British Columbia, is the CEO of Physicians for You, which recruits doctors from abroad for jobs there. He says he's never been busier and the route to Canada has never been easier. You can now actually get your full licence without actually even getting into the country, which you never could before. You'd have to sit multiple exams to do that. Also, they've removed supervision in some of the provinces as well, with sort of limited doctors where they could work.

One of the doctors Martin's helped is family physician Dr Ali Bryce, who also works in British Columbia. He says as well as better pay and less pressure than the NHS offered, he also wanted a different lifestyle. We wanted to go somewhere where we could enjoy the hobbies that we enjoy, and Canada had a lot of that with snow sports and outdoor hiking and just space really. A recent survey by the Doctors' Union, the British Medical Association, suggests four in 10 doctors are planning to leave the NHS and work abroad. The UK government says there's

no money available to increase the salaries of British doctors, but they might have to find some more cash or risk an ever greater exodus abroad. In London, I'm the BBC's Elizabeth Hodgson for Marketplace. This final note on the way out today, ending where we started with Mitchell Hartman's story on the woes of trying to buy a home right now. Credit News Research has come out with its list of the best and worst markets for first-time homebuyers based on things like affordability, livability, and employment growth. Bad news first. California metros make up six of the top 10 worst markets, San Jose, San Diego, and LA, taking spots one, two, and three. Topping the list of best markets are, in order, Pittsburgh, Austin, and San Antonio. Our daily production team includes

Andy Corbin, Elise Hassan, Richard Cunningham, Maria Hollenhorst, Sarah Leeson, Sean McHenry, and Sophia Terenzio. I'm Kristen Schwab. We'll see you tomorrow. This is APM. All over the country. We need to improve reading in Wisconsin. Schools are changing the way they teach reading. I'm calling for a renewed focus on literacy. We have gotten this wrong in New York and all across the nation.

And it's happening because of a podcast. I think your podcast has changed my life. And I'm going to share this podcast with everyone I meet. Sold a Story investigates how teaching kids to read went wrong. New episodes of Sold a Story are available now.