In more normal times, first-time home buyers move into starter homes. As their families grow, they upgrade to bigger houses. Eventually, empty-nesters and retirees sell their larger homes to downsize or relocate.

Now, record-high prices are disrupting the usual churn. Plenty of households could sell their homes for a big profit, but then they would have to find a new place to live. Many are unwilling to compete in this frenzied housing market, where they could be subjected to the fierce and costly bidding wars that have become commonplace across the U.S.