Jul 8, 2023 - Real Estate

Golden handcuffs lock up Minnesota's housing supply

Illustration of a handcuff on a keychain in a lock

Illustration: Sarah Grillo/Axios

Nearly all Minnesota mortgage holders have a rate below 6%, locking homeowners in place and leaving buyers with fewer homes to choose from, per Redfin data shared with Axios.

Why it matters: Homeowners are experiencing the "golden handcuffs" phenomenon: They have a great rate now and would face a higher monthly payment if they move, Redfin chief economist Daryl Fairweather tells Axios.

  • With fewer homeowners wanting to give up their interest rate, the number of homes sold in the Twin Cities in May was down 28% compared to a year prior, according to Minneapolis Area Realtors data.

The big picture: It's not just a local issue. Nine in 10 U.S. homeowners with mortgages secured 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.

What they're saying: St. Paul homeowner Nathaniel Hood says that after securing a 2.9% rate in May 2021, he's staying put in Highland Park for a while.

  • "If we purchased today, the same monthly mortgage payment would be for a significantly smaller and less nice home," Hood tells Axios.

Yes, but: People are still buying, with metro-area homes selling faster now than in the May 2020 pandemic buying frenzy, per Minneapolis Area Realtors' latest data.

  • Lifestyle changes β€” such as a new job or growing or shrinking households β€” are still happening, says Brianne Lawrence, president of the Saint Paul Area Association of Realtors.
Monthly mortgage payment in Minneapolis metro area
Data: Redfin; Chart: Alice Feng/Axios Visuals

By the numbers: More than a quarter of Minnesota homeowners with mortgages had a rate below 3% in the fourth quarter of 2022, per Redfin.

  • About 42% of mortgage holders β€” the biggest share β€” had a rate between 3% and 4%.
  • And only 5% had a rate above 6%.

Reality check: Lower rates could loosen up some supply, but not enough to meet demand, Fairweather tells Axios.


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