Jul 8, 2023 - Real Estate

Golden handcuffs lock up Illinois' housing supply

Illustration of a handcuff on a keychain in a lock

Illustration: Sarah Grillo/Axios

Nine in 10 Illinois homeowners with mortgages have a rate below 6%, locking them in place and leaving buyers with few homes to choose from, per Redfin data shared with Axios.

Why it matters: Homeowners are experiencing the "golden handcuffs" phenomenon: They might have a great rate now, but likely can't move without spending a lot more cash, Redfin chief economist Daryl Fairweather tells Axios.

  • There were fewer homes on the state's market in June than at any other time in recent history, according to Illinois Realtors.

By the numbers: Nearly a quarter of Illinois homeowners with mortgages had a rate below 3% in the fourth quarter of 2022, per Redfin.

  • And 38% of mortgage holders had a rate between 3% and 4%.

Lincoln Park condo owner Valerie Lapointe says she has no plans to sell her place after refinancing to a 3.2% interest rate in 2020.

  • "If anything, when I need to move I would rent it out," she tells Axios.

Andersonville homeowner Emily Jelsomeno says she's putting off a move to Humboldt Park or Ukrainian Village because of her 3.1% rate.

  • She's eyeing the "bigger dating pool" and "more eclectic mix of people there," but says, "If I move now, I’d need to downgrade about $100,000 to compensate."
Monthly mortgage payment in Chicago metro area
Data: Redfin; Chart: Alice Feng/Axios Visuals

The big picture: It's not just a local issue. Nine in 10 U.S. homeowners with mortgages secured rates below 6% as of late 2022, per the new Redfin report. Meanwhile, mortgage rates have swung between 6% and 7% nationally in recent months.

Yes, but: Some people still need to buy homes because of life transitions, such as a new baby or a newly empty nest, West suburban realtor Debbie Pawlowicz tells Axios.

  • "Not a lot of people are moving because they want a different home or because they feel they can make money off the sale."

Reality check: Slightly lower rates could loosen up some supply, but not enough to meet demand, Fairweather says.

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