The low interest rates and high salaries of recent
years have people staying put; part of the American dream slips away
Joe Pinsker and Callum Borchers Oct. 13, 2023 5:30 am ET
Across the country, people want to find better jobs, bigger homes and even nicer gyms. But
making any of those leaps right now could leave them worse off financially in the long run.

Low interest rates, high salaries and membership discounts scored before and during the pandemic
often can’t be matched today, binding people in golden handcuffs. Many feel comfortable, but stuck.

Some who job-hopped when the labor market was at its tightest negotiated hefty raises or work-
from-home arrangements that other employers might not match today. Homeowners eager to
reach for another rung on the property ladder are staying put because they aren’t willing to let go
of sub-3% mortgages that are unlikely to be available again soon, if ever. Today’s higher rates
effectively limit their budgets, putting more expensive homes further out of reach.

While economists say the constant pursuit of new and better opportunities is a sign of a strong
economy, it can also fuel inflation. Businesses paid premiums for talent in recent years, and flush
workers helped drive up prices of homes, cars and other goods. As the Federal Reserve tries to
stamp out inflation by raising interest rates, many consumers have less buying power and are
holding on to what they have.

“That is what the Fed is trying to do. That’s the point of raising interest rates,” says Dana M.
Peterson, chief economist at the Conference Board, a business-research nonprofit. If people
continue to feel stuck even after the Fed eventually lowers rates, that’s when there would be cause
for worry, Peterson says.

Home sales are now mired in the worst slump in more than a decade and workers are quitting jobs at
a rate that has slowed to the prepandemic norm.

Pessimistic Americans are driving from the same old homes to the same old jobs in the same old
cars. The average age of cars and light trucks in the U.S. is at a record 12½ years, according to
S&P Global Mobility. Kelley Blue Book reports new-vehicle prices have plateaued at 25% above
prepandemic levels and inventory shortages persist for certain models, stalling some trade-

In matters big and small, people feel they cannot improve on their current situations. They’re
mentally or emotionally ready for a change but can’t bring themselves to walk away.

“It’s very hard to tell whether the grass is actually greener,” says Justin Sousa, a software
engineer in Massachusetts.

In more than six years at his company, Sousa periodically craved new challenges and entertained
other offers. He says his employer always countered the poaching attempts and sometimes awarded
bonuses to keep him. The promise of another headhunter dangling a raise never felt far off until
the recent spate of tech-sector layoffs.

So Sousa, 36, is standing pat. He figures a job change now would be a lateral move, and he has no
plan to test the market, especially with twins on the way.

Jumping ship is usually the best way to earn more money, but job switchers’ wage-growth advantage
over those who hang around is the smallest in three years at 0.4 percentage points, according to
the Federal Reserve Bank of Atlanta. Wage hikes are harder to come by in many industries. Across
20,000 job titles on

According to ZipRecruiter, the average advertised salary for most roles is less than it was last
Those who are locked into favorable positions won’t get much sympathy, though there can be
collateral damage. People hoping to buy houses for the first time have limited options when
existing owners can’t afford to trade up from their starter homes. Ambitious workers can find
themselves blocked from promotions if the people above them don’t move on.

Fewer innovations spring from startups when would-be entrepreneurs opt to play it safe in their
current jobs. Applications to form new businesses dipped 0.9% in August to a seasonally
adjusted total of 466,163, according to the Census Bureau. That’s more than 15% below a peak in the
summer of 2020.

For many, things haven’t necessarily taken a turn for the worse. Rather, their grip is slipping on
a piece of the American dream: the feeling that something better is achievable.

Home is where the bargain is

Many homeowners feel trapped by their low mortgage rates. John Dealbreuin is looking to make the
most of the house he feels stuck in.

Dealbreuin, a 44-year-old early retiree in South San Francisco, wants a bigger house so that he can
invite his parents, ages 78 and 83, to move from India to live with him. But he’s reluctant to part
with the home he bought a decade ago—and the 3.3% mortgage he carries on it.

Dealbreuin decided to stay put and build a 300-square-foot guest unit in his backyard. If his
parents ultimately decide to remain in India, he says: “I’d be disappointed that I wouldn’t be here
with them, but I don’t look at this as money lost because it’s still adding value to my property.”

The current average rate for a 30-year, fixed-rate mortgage is 7.57%, according to Freddie Mac.
In the second quarter this year, 60% of homeowners with a mortgage had a rate of 4% or lower,
according to an analysis of government data by First American Financial Corporation.

The larger the gap between homeowners’ mortgage rates and the going rate for a new loan, the less
likely they are to move, according to a recent working paper from researchers at the University of
Illinois and the University of Pennsylvania.

Their findings suggest that people with 3% mortgages today could be about 30% to 40% less likely to
move than they otherwise would be, says Lu Liu, an author of the paper and a finance professor at
Penn’s Wharton School.

When homeowners don’t move, that limits the number of houses that are bought and sold. And Liu
found that those who locked in low mortgage rates are less likely to move in response to wage
growth in nearby areas, potentially making the labor market less dynamic.

Not all that glitters…

Some cuffs are merely gold-plated.

Mario Moreta’s monthly gym membership in New York City would cost about $200 if he joined today,
but he is grandfathered in at $85 a month, a steep discount even when he got it years ago. It feels
like a steal—except when the hot water is out in the showers, live DJs blare music he dislikes, and
he has to wake up two hours early to go in the morning and avoid the evening crowds.

“I’m getting what I’m paying for,” says the 29-year-old finance manager at a retail brand. “It’s
not meant for me to go to a spa every day.”

Though it can often be financially prudent to stay the course, people tend to overvalue things that
belong to them, says Annie Duke, a former professional poker player and author of “Quit: The Power
of Knowing When to Walk Away.”

Behavioral scientists call this the endowment effect. Whether a coffee mug or a house, Duke says,
“we have this issue of not wanting to give it up.”

She recommends asking two questions to improve decision making: How much would you be willing to
pay to be happier in this area of your life? And, if you were considering entering an
arrangement just like this one today, knowing all you know now, would you choose it?