Why Virginia's housing supply is locked up

The sharp spike in mortgage rates over the past year is locking Virginia homeowners in place and leaving weary buyers with fewer options.

What's happening: A whopping 66% of homeowners in Virginia with mortgages had a rate below 4% as of late last year, per Redfin data shared with Axios.

• Nearly 28% have rates below 3%.

Meanwhile, just 15% of homeowners in the state have a rate of more than 5%, as of the latest data from October of last year.

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, according to Redfin chief economist Daryl Fairweather.

• Those cuffs are keeping housing inventory on lockdown.
• Richmond metro saw a 35% drop on new listings year over year in June, according to data from the Richmond Association of Realtors.

State of play: A higher rate can lead to significant differences in monthly payments.

• For a home with a sales price of $310,075 — the median Virginia sales price in 2021 — a monthly payment at a 3% interest rate would be $1,493 assuming a 20% down payment.
• At 6.4%, the payment would jump to $2,008.

Zoom in: And median sales prices and home values keep rising, in part driven by a lack of inventory, according to Zillow.

• Richmond saw the highest year-over-year increase in home value in the nation last month, Zillow reported.

• The median sales price for metro Richmond hit $385,000 in June, per Richmond real estate agents.

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.