Jul 8, 2023 - Real Estate

Golden handcuffs lock up Denver's housing supply

Illustration of a handcuff on a keychain in a lock

Illustration: Sarah Grillo/Axios

Most homeowners with a mortgage in Colorado have a rate below 4%, per Redfin data shared with Axios. That's leaving homeowners locked into place and buyers with few homes to choose from.

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

By the numbers: Only about 4% of homeowners with mortgages in Colorado had a rate above 6% as of late 2022.

  • And 29% had a rate below 3%.

What they're saying: "Inventory is low, but not critically low," Denver real estate expert Steve Danyliw says.

  • Danyliw predicts the inventory swings won't be as intense this year, in either direction.

Zoom in: Mayra Ramirez and her husband bought their three-bed Denver home in 2009. They refinanced and locked in a 2.51% mortgage rate, and said they have no reason to move.

  • And Andrew Parady and his wife bought their Denver home in 2022 and locked in a 4.75% mortgage rate. "We feel very fortunate to have bought the place we did during that market," Parady tells Axios.

The golden handcuffs phenomenon isn't new, but because mortgage rates have more than doubled, it's more stark than ever, Fairweather tells Axios.

Monthly mortgage payment in Denver metro area
Data: Redfin; Chart: Alice Feng/Axios

Buying a median-priced home in the Denver metro requires a lot more cash than it did when rates were lower.

Yes, but: Buyers are also exploring adjustable-rate mortgages or buydowns in hopes of a lower monthly payment, Fairweather says.

What's next: Denver needs to build more rental and for-sale housing to move the needle toward a more balanced market, Danyliw says.

Zoom out: It's not just a Denver issue. Nine in 10 U.S. homeowners secured mortgage rates below 6%, per a national Redfin report. In the U.S., mortgage rates have swung between 6% and 7% in the last 10 months.

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