Indiana homeowners grabbed low mortgage rates and won't let go
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Soaring interest rates are constraining homeowners — in other words, would-be sellers — even more than buyers.
Driving the news: Roughly 60% of homeowners with mortgages in Indiana have a rate below 4%, per Redfin data shared with Axios. That's locking homeowners in place.
- More than 20% have rates below 3%.
Why it matters: Mortgage holders are experiencing the "golden handcuffs" phenomenon: They have a great rate now and can't move without spending a lot more cash, explains Redfin chief economist Daryl Fairweather.
By the numbers: Anyone who bought a $252,000 home with a 20% down payment and a 3% interest rate is spending $1,214 a month, but a house with the same purchase price would cost $1,632 a month with a 6.4% mortgage rate.
What they're saying: "Considering a move today means finding a new home and financing it at rates that have averaged more than 6.5% since January," Lynn Wheeler, president of the Indiana Association of Realtors, said. "Even with prices still rising, more potential sellers are choosing to stay put."
What we're watching: New listings in Indiana (45,614 through June, down 17%) fell at a higher rate than sales (37,406, down 14%), per IAR data, which shows homeowners are entrenched even as buyers prove willing to pay high rates for increasingly expensive homes.
Zoom out: It's not just a local issue. Nine in 10 U.S. homeowners secured mortgage 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.
- The average 30-year fixed mortgage rate was 7.18% Monday.
Yes, but: Buyers are also exploring adjustable-rate mortgages or buydowns from builders in hopes of a lower monthly payment, Fairweather says.