Rising interest rates are stopping homeowners from selling their homes
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The sharp jump in mortgage rates over the past year is locking North Carolina homeowners in place and leaving prospective buyers with fewer options.
- More than 60% of homeowners with mortgages in North Carolina have a rate below 4%, per Redfin data shared with Axios.
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.
- Meanwhile, 19% of homeowners in the state have a rate of more than 5%, as of the latest data from October of last year.
By the numbers: A higher rate can lead to significant differences in monthly payments.
- For a home with a sales price of $360,000, a monthly payment at a 3% interest rate from 2021 would be $,1733, assuming a 20% down payment.
- At 6.4%, the rate would be $2,331.
What they're saying: Matt Fowler, the executive director of Triangle Multiple Listing Services, said rising interest rates can have the effect of "trapping" homeowners that might want to buy a bigger house.
- "They may want to move," he said, "but when they turn around and look at what they'd have to pay on a monthly basis to buy a little bit more house … the cost of doing that was just really high."
More broadly, he added, the interest rates have continued to make buying a home unaffordable for many, as monthly payments can be hundreds of dollars more per month than they would've been last year.
- It's led to some price decreases across the Triangle, he said, but the monthly payments might still be just as expensive.
- "The general affordability (of homes) has never been more challenging," he said, when you consider the lack of supply and the interest rates.
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.
Yes, but: Buyers are also exploring adjustable-rate mortgages or 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.