Jul 14, 2023 - Real Estate

"Golden handcuffs" lock up Seattle's housing supply

Illustration of a handcuff on a keychain in a lock

Illustration: Sarah Grillo/Axios

More than two-thirds of mortgage holders in Washington state had rates below 4% as of late last year, locking homeowners in place and leaving buyers with few homes to choose from, according to an analysis from Redfin.

Why it matters: Homeowners are experiencing the "golden handcuffs" phenomenon, meaning they might have a great rate now, but likely can't move without spending a lot more cash, explains Redfin chief economist Daryl Fairweather.

By the numbers: In the Seattle metro area, buying the median-priced home in 2021 at a 3% rate would have cost about $3,553 monthly, per Redfin.

  • At 6.4% — the U.S. average rate in May — the same $737,819 home would cost an estimated $4,778 per month.
Monthly mortgage payment in Seattle metro area
Image credit: Data: Redfin; Chart: Alice Feng/Axios

What they're saying: Many homeowners are choosing to stay put rather than put their homes on the market, Zillow spokesperson Gina Cole told Axios Seattle — and that's one factor causing home values to climb.

  • "There just aren't enough homes on the market in many places — and that's especially true in Seattle, which has seen new listings and total inventory fall farther than most other metro areas," Cole wrote in an email.

By the numbers: New listings in the Seattle metro area are down 41% compared to last year, according to Zillow.

  • That's the third-biggest year-over-year drop among major metros, behind Las Vegas and Phoenix, Cole said.

Meanwhile, pending sales in the area fell 5.9% from May to June, while the typical home value rose 1.5%, to $710,133, per Zillow data.

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.
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