Jul 31, 2023 - Real Estate

How "golden handcuffs" are pinching Houston's housing market

Illustration: Sarah Grillo/Axios

Roughly 57% of homeowners with mortgages in Texas had a rate below 4% as of late last year, locking homeowners in place and leaving buyers with fewer homes to choose from, per Redfin data shared with Axios.

Why it matters: Mortgage holders are experiencing the "golden handcuffs" phenomenon, writes Axios' Brianna Crane.

  • They might have a great rate now but likely can't move without spending a lot more cash, explains Redfin chief economist Daryl Fairweather.
Monthly mortgage payment in Houston metro area
Data: Redfin; Chart: Alice Feng/Axios Visuals

By the numbers: In the Houston metro area, buying the median-priced home in 2021 — $300,000 — at a 3% rate would have cost about $1,445 monthly, per Redfin.

  • At 6.4% — the national average rate in May — a home at the same price would cost $1,943 per month.

Zoom in: June listings in the Houston area are down nearly 20% compared to last year, according to Zillow.

The intrigue: Houston had 3.1 months' supply in June. Supply hasn't been that high since June 2020, according to the Houston Association of Realtors. But the supply is largely coming from investors selling properties.

What they're saying: "We have some sellers that are holding on because they do have a lower interest rate and they don't have to necessarily move right now," HAR chair Cathy Treviño tells Axios.

  • "But I think a lot of the properties that we're seeing are coming on the market are investment properties. So we do have a lot of investors out there that are putting their homes on the market and just trying to capitalize on the higher home prices."

Zoom out: It's not just a local issue. Nine in 10 U.S. homeowners had mortgage rates below 6% as of late 2022, per the Redfin report. Meanwhile, mortgage rates have swung between 6% and 7% nationally in recent months.

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

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

  • New construction isn't keeping up, either. Fairweather predicts it'll take the U.S. a decade to repair its housing shortage.
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