Albert Einstein remarked, “Life is like a bicycle. To keep your balance, you must keep moving.”
Unfortunately, household moves will freeze in 2023 to all-time lows. However, there is evidence this may shift in coming years. A thaw in mobility could be the silver lining in all this volatility.
Frozen Mobility to Start 2023
Fewer households will move in 2023 than have moved in the history of the data (possibly the history of the country). Before 2022 rate hikes, mobility was already at the lowest rate in the history of data by a lot—and that was before mortgage rates doubled to near 7%, locking homeowners in their homes for even longer.
Why Declining Mobility Matters
While many were applauding a post-pandemic boom in home sales, transactions would have been far higher if the same event would have occurred in prior decades. If owner mobility had been at mediocre 2003 levels, we would have seen an additional ~2.2 million (+~30%) home sales beyond what occurred post-pandemic. More moves = more sales.
Homeowners spend differently (and less) on their homes when they move less often (low mobility remodels). Dollars get diverted to outdoor and exterior projects, and we see the rise of long-lived composite premium products that make sense when homeowners move less often and stay longer. Reverse this trend, and the remodeling basket reshuffles.
Why Are People Moving Less Often?
- Demographic shifts explain about one-third of the decline in mobility versus prior decades. We simply move less as we age.
- Technology enables people to live similar lifestyles in very different regions, rather than move. Air-conditioning, work-from-home, and Amazon/Netflix have made lifestyle disparities between regions less geographic, and more financial.
- As the brilliant economist Tyler Cowen puts it, “Peace and high incomes tend to drain the restlessness out of people.” Moving is stressful, and when life is stable and times are good, there is little urgency to shake up the situation. Discomfort is arguably the most important aspect of mobility that gets the least attention. There are now signs that this is shifting, and that complacency is shifting to urgency.
Is 2023 the Bottom?
Looking past 2023, there is some evidence of a change underway, although it has not yet shown up in mobility numbers. If history is a guide, we may see mobility bounce in future years once prices stabilize.
A few pieces of evidence worth noting:
- Since 2018, the data shows a 7x faster swing than usual in households moving to find better neighborhoods with less crime. That’s a transition from the all-time lowest to the all-time highest, within four years. This group is small overall, but the pace and ferocity of the change is enough to suggest something more meaningful is occurring.
- The years 2008 to 2020 were marked by a 27% decline in new business formation, which is a proxy for lower overall dynamism in the U.S. economy (and complacency). That all has changed in the past 24 months, with a surge back to pre-Great Financial Crisis levels of business creation, which also tend to drive moving and investment.
- Mobility follows discomfort. One thing we learned from the inflation experience of the 1970s/1980s is that inflation is painful. The pain of that era is reflected in the surge in the “misery index” (coined during that period, which looks at inflation and unemployment). When prices and unemployment eventually stabilized (along with lower rates), the U.S. saw a corresponding surge in mobility, equivalent to about 5 million incremental moves at today’s scale of households. After waiting in discomfort, people sought out new, better places to live. That’s encouraging to ponder as we watch the Fed fight inflation in 2023.
My take: 2023 will be a frozen year for mobility. Fewer households will move by far than ever in the history of the United States. Longer term, the seeds for future mobility may already be planted, bearing fruit once prices stabilize.