Jul 14, 2023 - News

Utahns' exceptionally-low mortgage rates are locking up housing stock

Monthly mortgage payment in Salt Lake City metro area
Data: Redfin; Chart: Alice Feng/Axios Visuals

Utah had the nation's lowest share of homeowners paying mortgage rates higher than 6% by the end of last year, per Redfin data shared with Axios.

  • That's locking homeowners in place and leaving 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 paying more in their monthly mortgage payments, Redfin chief economist Daryl Fairweather explains.

By the numbers: Just one in 25 Utah homeowners had a mortgage rate above 6% as of the last quarter in 2022; the national average 30-year rate as of yesterday was about 7%, per Freddie Mac.

  • Nearly three-quarters of Utah homeowners had rates under 4%, with nearly a third under 3%.

For those paying low interest rates, monthly costs would likely balloon if they bought a home at the exact same price today.

  • For a home purchased at the 2021 median sales price in Salt Lake City, a 3% mortgage rate means $2,167 per month; at 6.4%, that monthly payment rises more than 34%, to $2,914.

What they're saying: "Homeowners are hesitant to sell their properties and lose their current low interest rates," Rob Ockey, president of the Salt Lake Board of Realtors, told KUTV in May.

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, 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 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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