NerdWallet's Smart Money Podcast - Going Back to Work Later in Life and Why the Housing Market Feels So Stuck

Episode Date: August 13, 2026

Learn why a 69-year-old retiree is returning to work and why homeowners are staying put in a stuck housing market. What happens when your nest egg doesn't grow fast enough to support your retirement? Hosts Sean Pyles, CFP®, and Elizabeth Ayoola talk with a 69-year-old listener who's returning to work after years of overly conservative investing left her savings falling behind. NerdWallet Wealth Partners CEO Ryan Sterling joins the conversation to help her think through how much investment risk to take at this stage, what required minimum distributions will mean for her taxes, and whether working even a little longer could change her outlook. Then: why does it feel so hard to find a home to buy right now? Senior news writer Anna Helhoski talks with NerdWallet mortgage writers Abby Badach Doyle and Kate Wood about why so many homeowners are choosing to stay put — and how that's limiting the number of homes on the market for everyone else. NerdWallet Wealth Partners, LLC is an affiliate of NerdWallet Inc. NerdWallet Wealth Partners is a fiduciary online financial advisor, offering low-cost, comprehensive financial advice and investment management. Learn more at nerdwalletwealthpartners.com/smart  The NerdWallet Homebuying Climate Index tracks how favorable conditions are for home buyers each month: NerdWallet Homebuying Climate Index Subscribe to our podcast’s free email newsletter for bonus content and more from our hosts at https://smartmoney-nerdwallet.beehiiv.com/  Want us to review your budget? Fill out this form — completely anonymously if you want — and we might feature your budget in a future segment! https://docs.google.com/forms/d/e/1FAIpQLScK53yAufsc4v5UpghhVfxtk2MoyooHzlSIRBnRxUPl3hKBig/viewform?usp=header Smart Money’s YouTube Channel: https://youtube.com/@nerdwalletsmartmoney To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Like what you hear? Please leave us a review and tell a friend. *The show notes were created with the assistance of AI. They have been reviewed by our editorial team for accuracy and quality. Learn more about your ad choices. Visit megaphone.fm/adchoices

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The Dog Stars, directed by Ridley Scott. In theaters, August 28th. Get tickets now. At 69, Claire has over. $200,000 invested conservatively, but she's worried it may not lost her the duration of her retirement. Like many others, rising costs and tightness eggs have pushed her back into work. We have Claire with us today to discuss going back to work later in life and also how that might impact her investing strategy.

Welcome to NerdWallet's Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Piles. And I'm Elizabeth Ayala. We have Claire with us today. Welcome to Smart Money, Claire. Thank you very nice to be here. Great to have you, Claire. We're also joined by Ryan Sterling, Wealth Advisor at NerdWallet Wealth Partners and Affiliate of NerdWallet, Inc. Ryan, great to have you again. Hi, Ryan. Hello, it's good to be back. All right, Claire. So you live in the Portland area, and this has been the theme since we are shooting live from Portland, Oregon. Tell us what you love the most about living in Portland. Well, I love the weather, the plants, everything. There's so many different plants. It's beautiful. And there's a lot of cultural. benefits from Portland as well, you know, plays, activities, concerts, and so forth. So

it's just an all-around great place, good restaurants, too. Phenomenal restaurants. You mentioned before we started recording, you've been here since the 70s, and you actually were here when Mount St. Helens erupted. What a phenomenal thing to be here for? I think it was really neat. I was glad I was part of that. Well, Claire, tell us a little bit about your financial situation right now. How do you feel about your finances? If you have to describe your finances using a color, what color would it be? I guess I would probably go red. Oh, okay. Tell us about it. And red not being a good one is what I mean. But I have a fixed income from Social Security and I make some money, but given the environment right now, it's not

enough money. And so I don't feel good about the situation at all. I'm very glad I have this money in the IRA, but I'm very hesitant to take any money out of that. So I just would like to invest more sensibly and make some good choices. I'm sorry that your finances are feeling red. I know that can be very stressful. And hopefully we can give you some help here to at least get you to yellow and then green. And Ryan, I want to bring you into this conversation. When you're talking with someone who is in retirement years

and maybe has to go back to work, how do you begin to approach these conversations in terms of what's going to be the best plan forward to actually have long-term financial security? It really comes down to, you know, what are your living expenses? What are your living expenses now and what do you anticipate your living expenses

to be in retirement? And then it's looking to see, you know, what are the income sources? Claire, of course, he mentioned Social Security. You know, we'd ask a question, are there any pensions involved, any other income sources that are coming in? And then kind of the next thing after that

is we have to look at, you know, the liquid assets, whether it's in the IRAs, taxable accounts, etc., to see how can that plug the gap and ultimately, you know, create a roadmap in a requirement that takes in account those income sources, any additional funds from the investment portfolio, and then reconciling that with expenses.

Claire, can you provide Ryan briefly maybe with an outline of some of your assets? I know you mentioned owning a home, not having any debt. You mentioned having the $200,000 conservatively invested. So can you run us through that? Sure. Well, I have the $200,000. I also have $50,000 in a high-yield savings account, and I'm very reluctant to take it out because it's, you know, it's 4%.

I make some good money off that. I own a home. I don't have a lot of equity in it. I own my car. That's about it. The 200,000 that you reference, is that the IRA that you have? It is, yes. And how is that invested right now?

You know, I just switched to a different investor and thought I couldn't tell you right now. I know it was very conservative before because it really hadn't moved much over a few years. And so when my son heard that, he said, well, you've just got to get with our investors. So I switched. And so we'll see where I'm going to end up. Claire, I'd like to hear a little bit more about how you maybe have changed your investments and what your conversations with your son were like. And Ryan, to bring you in here, how Claire might get your perspective on what sort of timeline for investments she should maybe be considering, as she has this $200,000, it's hopefully going to be funding retirement going forward.

So what, in a practical sense, might that mean for having an investment mix and also beginning to draw some money from this investment, too? In two and a half years. Now, I'd mentioned it hadn't moved much, but I guess I stand corrected, it had gone up $14,000 in two and a half years. So, Brian, is that a good? amount of money in two and a half years, the two and a half that we just recently been through. It's $200,000 after the $14,000 increase. No, it's 214 now. That is consistent with a pretty conservative portfolio. I would have liked to see it probably invested a bit more aggressively and would have liked to have a higher return than that, but it is consistent with something

that's pretty conservative. Yeah, that's what my son was saying. You know, you need to get it in a little bit more aggressive fund. Ryan, I would love you to touch on because I know usually We talk about when you're younger, maybe having target date funds and then it becoming more conservatively as you get older. So in someone like Claire's situation, how aggressively should they be investing, especially if they feel like they don't have enough yet to retire? And like her, you have to continue working. There is a glide path where it gets more conservative as people get closer to retirement and into requirements. That said, conservative being defined as it glides down to roughly 50-50 in terms of stocks and bonds. So just because it glides down doesn't mean it goes to 100% fixed income.

It still has a healthy stock exposure. And the reason for that is, you know, we have to think about matching the risk with a duration of funds. In your late 60s, early 70s, you do really have to think about a duration of 10 to 20 years. None of us know how long we're going to live. But I would tell you from an actuarial standpoint, if you make it to the age of 70, there's a 50-50 shot that you're going to make it to the age of 90. One of the mistakes people make is they get to their late 60s and say, oh, I have a very short time horizon.

And in certain respects, you do. By that said, it's not a time horizon of zero or a couple of years. It potentially could be a time horizon still of 20 years. Right. So we want to be able to, of course, manage the risk because there's likely going to be, you know, some sort of withdrawal need from the portfolio at some point in time, especially as you reach something called required minimum distributions, which at the age of 73, you're actually going to have to take some funds out of this portfolio.

So we know right now that there's going to be some draw coming from the portfolio. So we don't want to make it 100% stocks. We don't want to make it super risky. But at the same time, it still warrants a growth engine. So you will need a certain amount of stock exposure. Now, I would say, and again, like we'd have to look very granular with your situation. But typically speaking, for someone in their 60s, I would say, say that a portfolio of, you know, 60 to 70 percent stocks is on the high side. I would say

30 to 40 percent stocks is on the low side. So if we want to kind of tighten that ban, typically speaking, what I see is somewhere between 40 percent to 60 percent in diversified stocks. Okay. Now, Claire, just to go back a little bit, can you tell us a bit about when you fully retired and then when you went into semi-retirement or like, what was your journey there? I've actually never completely retired. Once I retired from me, my set job that I had done for many years, which is a loan officer. I was a loan officer for 35 years. I started doing bookkeeping for a couple of attorneys, and that was immediate as soon as I retired. Now, Ryan, can you talk to us about what could be a first step that Claire could take to

maybe look at how much she needs to retire, how much she should be investing? Like you've pointed out, how aggressively she should be investing. So what does it look like for Social Security? It's $2,400 a month. And then what do your expenses look like? Well, my mortgage payment is about 3,000. And I don't know if car payment, you know, groceries, gas, utilities. So add another 1,500 to 2,000 on top of the mortgage payment of three. So I'm looking at about five. So here's a very kind of rough back of the envelope and just bear with me for one second as I just kind of run a quick calculation here.

So you're starting right now at 214,000. Right. How long realistically do you see yourself work? Well, as long as I have to. Honestly, if I didn't have to work now, I wouldn't. But as long as I'm going to have to. So that's kind of going to come from you or whatever other financial advisor is around. And, of course, how the funds do from now till, you know, whenever. I'd like to not touch anything until the required minimum at 73 hits. But we'll see. How much income do you have coming in right now? Oh, about 2,000 a month. So based on that, is it fair to say there's not a lot of capacity

to save Ben right now? Yes. If you're looking right now at needing, roughly speaking, $5,000, you know, you currently have a deficit of around $2,600 a month. So if you were to start at $214,000, and you were to take $2,600 a month as a withdrawal, let's just be conservative here, let's just say a 25-year time horizon, let's just be super conservative that this money needs to last for the next 25 years. And let's say we just get an, average return of 5% or so. So I'm going to look at $214,000, $2,600 monthly withdrawal, a 5% annual rate of return. And what I'm going to look at to see is how many periods does that last? Okay. You're looking at if you had a $2,600 a month withdrawal, earning,

call it roughly speaking, 5% to just be conservative on an annualized basis. This would last about nine years. Okay. You certainly want to continue work. You wouldn't want to retire right now. But let's just do just kind of one more kind of quick analysis here. Let's say you work for another five years. And let's just assume, again, 5%. That 214,000 at an annualized rate of 5% would grow to about 270,000 in five years. If we had that same $2,600 monthly withdrawal at a 5% annualized return, you would be looking at, roughly speaking, 12 years.

So in other words, if you retired the age of 75 with a $2,600 monthly withdrawal from the portfolio, you would roughly speaking have about 12 years of runway. Okay. And that's just not going to work. So I'm going to have to up what I'm making, which I can do. I've worked successfully for many years, but I worked hard and not want to work hard anymore. So, you know, that's the issue. One other variable here, though, is the equity in your house. Because every month that you're making your payments, you're starting to build more equity. Right. Hopefully, you know, you have the home appreciation over time. There is a potential lever to pull too in that at some point in time, you know, call it, you know, 10 years down the road, selling your house, downsizeding people, you know, take that equity out of the house and then rent for, you know, the next five to 10 years. So, you know, this analysis is not including that.

So you probably have a little bit more time than that. But I think the name of the game is really two things right now. It's continuing to work or it's increasing your savings rate, if possible. Okay. Or both. And Ryan, what are your thoughts on a product like a reverse mortgage in someone like Claire's situation? Let me just say. I've looked into reverse mortgage.

I was a mortgage loan officer for many years. And in fact, I recently spoke with the gentleman that I thought about going into the reverse mortgage industry. It's really an untapped industry. And the laws in reverse mortgages have really improved over the number of years. Years ago, they could really not be great avenues. They're very good now. But I don't have enough equity right now to be able to do a reverse mortgage. With anything like a reverse mortgage, you know, et cetera, it all is kind of contingent

on what does the offer look like. You're thinking about it the right way, though. And again, that's where it's increasing the risk of the investment portfolio so you can get more return over time. it's also being committed to working for as long as it takes. Sure. By working a little bit longer, you allow your investments to grow uninterrupted, or at least with minimal disruption. And then, of course, you know, if there's a chance to potentially save by either earning more or potentially lowering some expenses, if possible,

that could also then, again, help, you know, one or two things, either increase savings or if you decrease expenses, that's less of a demand on the assets in retirement. Right. So you're thinking about all the levers in the right way. And, you know, the fact that you're committed to it tells me that you're going to be good. You're going to be good. Well, thank you. You have to just be, you know, again, willing to make these choices. And it sounds like you're very much on top of it. Claire, I'd like to hear a little bit more about your living situation. Are you currently living alone? I do live alone. And I've considered living with another individual. It's hard to find that person, you know. It's hard to have that magic golden girl situation where you have roommates out of your friends. My friends and I joke about that.

And there's friends that are all over the country and we talk about the golden girl's situation. But haven't been able to get that down yet. Okay, because I'm imagining if you could possibly share your mortgage, that would really dramatically change your expenses each month. It would. And would give you some more breathing room. Right. I almost think I'd rather work more than do that.

Although, if it were the right roommate, that's a different story. You know, it's just very hard to know. There's always going to be some kind of conflict, no matter whom you're living with. Do you think there are any other areas where you could potentially lower your expenses, Claire, aside from your mortgage? No. And then, Brian, can you touch on how clear-going or rather increasing working hours might impact Social Security? Social Security, of course, is kind of a calculation based on what you put into it, right? So by maybe pausing Social Security, by allowing yourself to work more, to accumulate more on working hours and credits, that could potentially increase your Social Security in the next couple of years.

And, of course, it might not be dramatic, but when you add it up over potentially a period of, you know, 20-plus years, like, it could be impactful. Of course. But Ryan, just to clarify here, just if you go back to work and work more, your benefits won't be reduced at this point because you're at full retirement age, correct? That's right. And I have a question with a required minimum distribution, how is that calculated? Does it depend on what you have as assets? There's not a... It is. Okay. Yeah, there's a formula as a calculation. So it's based on life expectancy. When you're 73, there's going to be a table that basically takes your balance at the, that takes the year end balance. applies the formula, and that's the amount that you're required to take out. Here's the nuance, though. Okay, you're required to take it out. You're not required to spend it. So you are able to take it out. Now, that's a taxable distribution, but you can reinvest it in an individual brokerage account.

I see. So just because you're forced to take the withdrawal does not mean it has to, again, be spent. You can reallocate that in either your high-yield savings account, or you can have an individual brokerage. accounts. Right. Okay. Ryan, are there any tax planning considerations Claire needs to think about? Because required minimum distributions aren't that far away. And as we know, they can bump up your tax bill or even put you into a higher tax bracket. So what are some things that Claire should consider as that slowly approaches? One thing I was going to bring up is potentially doing Roth conversions. So you do have this window right now of three years where you can be converting funds from your IRA to your Roth IRA.

And based on what you're saying with respect to the income that you're earning both form what you have, Social Security, as well as your earned income, you're still in a relatively low tax bracket. So you do have capacity to do Roth conversions. Now, the Roth conversions, it is taxable, but given the fact that you are in a relatively low tax bracket, what that would do is that would convert the dollars from the IRA to the Roth, which means in the future, when you take those funds out of the Roth, you're not going to be taxed on it.

And there aren't RMDs from Roth accounts either. So it could continue to be. Correct. You know, over the next three years, and I would work with your advisor on this to see, you know, what does it make sense in terms of converting? There's a chance you could convert most of this to the Roth. But let's say you can't convert all of it to the Roth. That's fine.

You would start the RMDs with the IRA and then ultimately going to exhaust that first. And then you would move on to your Roth IRA. So your Roth IRA is something that you probably wouldn't potentially touch until you're 80. or beyond. But when you do take that out in the future, you're not going to be taxed on it. Of course, if I go back to work, I'm in a little higher tax category depending on what I'm going to make. And so maybe it wouldn't be a great idea to do the Roth IRA now. One potential issue could be, though, working at 73 and then having to take out a certain amount from your IRA, that's where you don't have a lot of choice.

What I would look into and I would run the analysis to kind of stack your income to say, you know, what's the marginal bracket that I'm in right now? Okay. See what capacity do I have to do Roth conversions before bumping into the next bracket? Okay. And compare that to what would that look like if I did nothing and had to take it out at 73? That's a very good point that I hadn't considered. I hadn't considered going to a Roth conversion.

You said three years, three years since the time I just invested it with this new investor, or is it three years from the time I first created the account? I guess what I'm saying with the three years is you have three years until the RMD. So you had this window that you can do it before you're required. to take it out. So you can do it at any time, basically, before you're RMD. That does exactly your rights. And Ryan, just to zoom out a little bit as we begin to wrap of the conversation, I'd like to hear some general best practices or principles that you bring up when you talk with clients who are nearing or beginning to enter retirement. It's one of those things

where I have yet to come across a client who regrets working another year or so longer. So I would say that working just one more year has a dramatic. dramatic impact on your probability of success. So I would say that if you've reconciled, I'm just making this up, that I'm going to work until 75, work until 76. I would say that's probably one of the biggest drivers I see. I think another thing that I see, though, too, is it's not uncommon that, you know, people when they reach retirement, that they miss having something to do, that maybe they don't want to work with the same intensity that they're working before. But there's other part-time opportunities. I'll just give a quick example. There was a client of mine who retired, was super

excited to retire. She was ready to retire. She got bored. She was very involved in a local theater. And she works at the local theater. And she makes some income with it. She gets socialization benefits from it. And she just likes to be there. Another client who works part-time at a golf course. And he doesn't need to. But again, he likes being in the community. And he's earning some money that certainly kind of helps in retirement. So, you know, I would say that that people underestimate how important a job might be, not just from the financial standpoint, but just in terms of the intellectual stimulation or the socialization elements of it. I agree, and I do miss the socialization part.

And I've considered a couple places that I would like to work, and I'm going to go after those and see if I can be hired. It's tough because if I'm going to give a resume, it's going to show all the stuff that I did for all these years, and it doesn't necessarily pertain at all to the job that I'd be applying for. I guess I'll just need to ride a really great cover litter telling someone my strengths, despite what I did all those years ago and get to get hired. And I've actually considered what I'd like to do is go back to work in a grocery store. I mean, I was a grocery checker years ago in college, and I kind of enjoyed it.

Yeah. And that's why I'd get a discount on my groceries. Exactly. Save me some more money. Well, Claire, as we wrap up, I do have one personal question for you, which is how did you envision? Because I know we have a range of listeners. of all ages and viewers, but how did you envision your retirement to be, or where did you think you'd be at this age versus where you are now?

I did not think I would be as I am now, but the difference is that I was married in the past, and we basically, or I kind of depended on that pension that my former husband got, and where I still married, I wouldn't have a problem. So I never really thought ahead about that much. What I would like to say to any younger viewers is please put away any amount of money you can monthly. Even if it's $20. It's just amazing how much it adds up and, you know, forget a couple of coffees every day or something like that and get that money. I think it's just so important. And I really didn't think about that as much as I should have as a younger person. That's powerful, but guess what?

It's never too late to rectify and you're doing all the things that you need to do now. So well done, Claire. Claire, that's a really good point in a lot of different ways. So, you know, number one, I tell you, we come across people in their 40s who say, I started too late. It's never going to happen. And I laugh. I say, are you kidding me? You have more than enough time to get started. So I just, I love the point of like, it's just, it's never too late to get started. And it's never too little. I think a lot of people think, oh, I have to put a lot in. I mean, just a little bit every month is going to make a big difference in my mind. Huge. Huge. There's a quote out there. I can't remember who it's attributed to, but it's,

we overestimate what we can do in a year and underestimate what we can do in a decade. To your point, you know, $20 here and there at a time, it doesn't seem like it's making a difference, but compound that over years and decades, and it makes a massive difference. Exactly. So again, little marginal improvements today for someone who's listening, who's in their 20s, 30s, 40s, even 50s, it does make a difference. Good. It's never too late to start.

But number two, you know, and I see this a lot, and this is something I do think it's important to address, and I was actually just having this conversation this past week about the importance of not just a pre-nup, but a post-nup. And I especially see that where there's a married couple and one spouse is leaving the workforce. And I feel like that's an especially important time to say, hey, if I'm leaving the workforce, we need to do a post-nup because that's leaving the spouse who has left the workforce. That's leaving them very vulnerable if something happens in the future. I also think it's important, too, that, you know, while people are building wealth together as a couple, you still need to look out for yourself.

And again, I'm a fan of building assets together, but you do, again, have to make sure that everything from your asset base, making sure that your retirement accounts are being maxed out to make sure that your skills are being sharpened. Exactly. And once again, if you are in a place where you are leaving the workforce and those skills are going to dull over time, and it's going to be hard to kind of get ramped back up. There has to be some sort of post-nup in place because you have to look out for yourself. That's a good idea.

I'm sure there would be a lot of couples that could be pretty tough to accomplish, but very good recommendation. Well, Claire, we've covered so many bases during this episode. What do you think your next steps will be? Well, I've given myself to fall to go back to work, and so I'm just figuring out what I'm going to do. I mean, I could go back as a loan officer. I could do any number of things, but I wanted to just keep it where I work outside the home and come back and don't have to work anymore.

So I'm going to do that by fall and then speak with the investment advisor and see where I stand. And my plan is not to touch that money and, in fact, maybe make it bigger until the RMD happens. I love that. And one more thing, I was just having a rant with Sean and our producer tests about how we're expected to work for 50 or 60 years. And sometimes it can get so hard and difficult. and I know you touched on saying if you didn't have to work that you wouldn't. So how are you going to kind of keep yourself motivated for however many more years that you need to work? I think it's going to depend on what job I am in. If I did end up back in my lone officer position, it'll be hard to motivate myself because it takes a lot of work to do that.

And I don't know that I'm really up for that. I would have to be up for it if I do it. But another job that maybe I just wouldn't enjoy more, it would be much easier to motivate myself. You see what I mean? Yeah. Yeah. Well, Claire, thank you. Thank you so much for your time. Thank you so much for helping me. And I really want to thank you, Ryan, for all the help that you gave me because it's very valuable information. Oh, my pleasure. It's so great to meet you, Claire, and you're doing all the right things. Ryan Sterling, advisor at Nerva Wealth Partners. Thank you again for coming on. Joining us. If folks want to learn more about Nerva We'll have a link in the episode of description.

And Claire, we love when people give us updates. So please let us know how it goes. I will. Six months a year, however far from now, we'd love to hear your progress. I will do that. And please all those younger listeners put money away right now. You heard Claire. Up next, this week's money news. Stay with us. Today's episode is sponsored by Rula. Finding a therapist is hard enough. But finding one who actually takes your insurance,

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using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify. Time now for our weekly money news roundup where we break down the latest in the world of finance to help you be smarter with your money. Today we're talking about the not so great home buying season that we've all been experiencing

and why it was years in the making. Our news colleague, Ana Hal Hoski, is back to talk about it. Hello, hi. Hey, Anna. Hey, Sean. Hey, Elizabeth. So, yeah, August is in full swing. And that means that the traditional home buying season is winding down.

Now, the latest data from the National Association of Realtors shows just how sluggish the market has been. Mortgage rates rose from June to July while existing home sales fell 1.7%. But there's a little bit more to this story. Existing home sales were up 0.9% from a year earlier. And that means that July 26 was still better than July 2025. And that's largely because mortgage rates are lower now than they were at the same time last year. But for buyers who spent the spring and summer frustrated by a shortage of, homes for sale, there's still one big reason that the market feels stuck, and it goes back to the

pandemic. Millions of homeowners locked in historically low mortgage rates in 2020 and 2021, and five years later, many aren't willing or able to give them up. Today, we're looking at how that pandemic mortgage boom is still shaping the housing market. New nerd wallet research shows just how dramatically conditions have changed for buyers. We're joined by mortgage writers Abby Doyle and Kate Wood. Welcome back, you two. Oh, thanks, Anna. Thanks, thanks. Happy to be here. So, Abby, take us back to 2020 and 2021. What was so unusual about mortgages then? So mortgage rates got really low. In 2020, the average rate on a 30-year fixed-rate mortgage fell below 3% for the first time ever. And it generally stayed there until around September 2021. So people rushed to buy, millions of existing homeowners refinanced, and they were locking in these incredibly cheap loans. And a huge number of those loans are still. on the books, almost half of outstanding mortgages today have a rate of 4% or less. And that's

according to Realtor.com's analysis of federal data. Now, Kate, Nervalet has some new original research that really puts that moment into perspective. So tell us about the new home buying climate index. We've just launched this new stat. Basically, every month, the NerdWallet Home Buying Climate Index gives the national market a score and a sort of weather forecast comparison based on how favorable or not favorable conditions are for buyers. So we look at five major data points. Mortgage rates, no surprise, home prices, incomes, unemployment, and new construction. So we put all of these together to kind of give you a snapshot of the housing climate at the moment. And then we can also take a look historically. So if we turn the clock back to the pandemic, what to the forecast look like at that

point? It was beautiful, right? It was sunny. It was gorgeous, right? Just perfect. Get outside weather. March 2021 had the best home buying climate index in over 30 years of data. So the number is out of 100. March 2021, it was at 89.5, right? So as Abby mentioned, that was when we were kind of coming to the end of this brief window of mortgage rates hitting historic lows. But, you know, wider context at that time, unemployment was falling. We might remember personal incomes were getting a boost. We were getting those pandemic stimulus checks. And also, you know, builders were starting. to get moving again and pull more permits. Right. We were just in a very different environment that we are now. So what happened next? Very different. Very different. So then we get 2022, which saw a real reckoning for the housing market. So all of that competition that Abby was talking about, people buying like crazy in 2020,

2021, that had sent home prices skyrocketing. At the same time, we've got the Federal Reserve realizing, oh, okay, you know, this post-pandemic inflation isn't going to be, their preferred word is transitory, but basically, it's going to be sticking around. So we've got the Fed raising the funds rate, and we've got mortgage rates shooting up to. Housing affordability is deteriorating pretty quickly. In a normal environment, you'd expect that higher mortgage rates would lead to some kind of softening of prices, right, the sellers would have to budge. But that did not happen, and our index plunged, right? You see this steep drop off in 2022. The clouds come rolling in. And we've seen, you know, conditions bounce around since then, but we have not come close to that

2021 peak or really even to where we were before the pandemic. And that sunny 2021 market is casting a pretty long shadow on today's market. And the people that scored those great mortgage rates then are now part of the reason that today's buyers feel so stuck. How does that happen? Basically, they've got a deal that's too good to give up. So say you have one of those 3% mortgages. You want another bedroom or you'd like to move closer to family.

And selling your house means giving up that 3% mortgage rate and taking on a new mortgage closer to 6% or 7% these days on a home that probably costs more too. That's the mortgage rate lock and effect. You can afford to stay that you might not necessarily be able to afford to move. And that's why people call it the golden handcuffs. So Kate, can you actually see that lock and effect in the mortgage data? You really can. And as a huge mortgage nerd, this is something that I find actually really fascinating. So historically, if you're looking at existing mortgages, your biggest group of outstanding mortgages, so loans that people are still actively paying off, right, is always about one to four years old. And that makes sense, right? You're always going to have new buyers. You're always going to have people refinancing. There's always going to be new loans. But recently, we've seen this shift where that is no longer the case. So again, looking to this realtor.com analysis, of data from the Federal Housing Finance Administration, right now a record high, 41% of outstanding mortgages are five to seven years old. And that is these people who are hanging on to these

2020, 2021 vintage loans, right? And so that compares to loans that are one to four years old at 29%. Normally, again, that's the largest group. So we are really seeing this huge wave of these pandemic-era mortgages just sticking around, which means, okay, sure, those people aren't refinancing, we would expect that, but they also are not selling, right? These loans are just not going anywhere. And really, you know, if we stay in this state, in a few years, potentially we're looking at mortgages that are 10 to 12 years old, probably being a larger proportion of existing loans than we would have ever seen before. So we already have this giant group of homeowners holding mortgages from a completely different interest rate universe and it's probably going to get bigger. It's not necessarily

going to get bigger. It's that the largest group of existing loans is likely to keep getting older, right, rather than the kind of newest cohort of loans always being the bulk. And the reason that we're seeing this is because the rate that someone has versus today's prevailing rates really have a profound effect on whether people are going to sell. Researchers at the Federal Housing Finance Administration a couple years ago found that for every percentage point that your mortgage rate is below today's going rate, your likelihood of selling is going to drop about 18%. So think about Abby's example a minute ago of someone who's got roughly a 3% mortgage rate. Even if we kind of ignore, you know, after that decimal place, we're still looking at

someone who's roughly, you know, three solid percentage points off of today's rates. So looking at that FHFA research, that person is so much less likely to sell, right? So if every percentage point drops your likelihood of selling 18%. We're doing that addatively. Someone who is three percentage points off prevailing rates is more than 60%, if we put it all together, more than 60% less likely to put their home on the market. And if you're a first-time buyer, you know, looking right now or if you bought in the past couple years like I did, it's really easy to be like, oh, boo-hoo, champagne problems. Your mortgage rate is too low. But having that low mortgage rate really is a burden. for today's existing homeowners.

Maybe your family's grown and you need more space or maybe you're retired and you're like super ready to downsize. But then you look at the payment on your next house and you're like, I literally can't make this work. And a lot of people who do sell right now and are giving up those great rates are selling because life forces the issue, something like a death or a divorce or relocating because of a job. Otherwise, staying put may make the most financial sense.

I can't help but think about the overall availability. of homes. When enough homeowners are staying put, there are going to be fewer homes for everybody else. Exactly. And in this case, we are literally talking millions of fewer homes. So same FHFA researchers looking at this mortgage rate lock-in effect, they estimate that from like mid-2020 to mid-24, rate lock-in prevented about 1.7 million home sales. So these are homes that theoretically probably should have changed hands. And then here's the, even bigger twist. Higher rates just on their own, which is exactly what we were seeing in that 2022, 2023 time period, those should have pushed home prices down about 6% right on their own.

They should have been depressing prices. But rate lock-in was squeezing supply so much that that in itself was pushing prices up about 7%. So that's where that price relief went. It was completely wiped out by this lack of inventory. So higher rates made mortgages. more expensive and helped keep home prices high. Yeah, it is quite the one-two combo if you're a home buyer. So if Lockins keeping this many homes off the market, Abby, what could actually help loosen things up? Long term, we need to build more affordable homes. And that's why you've heard us talk about the 21st century Road to Housing Act the last couple times we've been here. No, no. Housing supply is basically our favorite recurring characters at this point. Pretty much.

And this landmark new housing law is designed to make it easier and cheaper to build new home. But like we've said before, those changes are going to take years to play out. I'm actually starting to think about buying something. So now this is kind of scaring me off. What if you do want to buy now? So if you do want to buy now and you're looking for practical advice, I'd say be disciplined, but stay flexible. First, know your must-haves and know your deal breakers. So that way, limited inventory doesn't make you feel.

pressured into a compromise that isn't the right fit for you. And then figure out where you can flex. Maybe you're flexible on exactly which neighborhood you want to buy in. Or maybe you start looking at new construction or maybe you're looking at a townhouse or a condo instead of a detached single family home. And finally, of course, be ready. Have your finances lined up. Have your pre-approval ready. So that way when a good listing appears, you're all locked in and you're ready to move quickly. All right. That's some helpful advice. Now, Kate, let's bring a back to Nerdwald's Home Buying Climate Index. What does the data tell us about where buyers stand today? So nationally, the forecast is partly cloudy. Yes, it's a long way from the sunshine of 2021,

but it is also a very long way off from our absolute bottom of the index, which is back in 1991, when you're glad you weren't buying a home back then, right? Something that's really important to remember, though, is that this is a national level statistics. So we are looking at this, you know, weather, so to speak, for the entire country, not the forecast for your local zip code. Depending on where you live, you might have more inventory, less competition, you might have more room to negotiate. That's something I was definitely hearing the other week talking to loan officers at the mortgage brokerage that we own, actually, next to our lending.

For me personally, I'm in Connecticut. My market's terrible. I would say it's worse than the national level. In any event, this is why I would really recommend checking out the home buying climate index on nerdwollot.com. When you look at the visuals, you look at the different graphs, this whole shift that we're talking about is pretty much impossible to miss. You can really see that we have this extraordinary outlier in that pandemic era market. We've got this plunge in 2022.

And yes, we're not, you know, where we were even pre-pandemic now, but also things have been a lot worse. Also worth noting we are updating the index every month as rates change, prices change, the economy itself changes. You can keep checking the forecast to see whether conditions. are getting sunnier or if there are some more clouds on the horizon. All right, we'll put a link to Nerbald's Home Buying Climate Index in the show notes. I know that I will be keeping track of it myself. Abby and Kate, thanks so much for joining us. Thanks, Anna.

Oh, always a pleasure. And thank you, Anna. And that's all we've got for this episode. Remember folks that we nerds run on your financial questions, so send them our way. You can call us or text us on the Nerd Hotline at 901-7306373. That's 901-730 nerd. You can also email us at podcast at nerdwalt.com or leave us a comment on spot or YouTube.

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