10 cities where low mortgage rates have homeowners locked in 'golden handcuffs'
Despite signs that the “lock-in” effect is beginning to fade, many homeowners that snagged rock-bottom mortgage rates during the pandemic are still waiting on rates to fall again before making a move.
This phenomenon keeps current mortgage-holders in what’s known as “golden handcuffs,” where they choose not to move homes — even when they may want or need to — to hang onto their existing rate.
“Having a mortgage with a low interest rate is a fantastic benefit to existing homeowners, but sometimes being in a great position can limit your options,” said Danielle Hale, chief economist, Realtor.com (NWSA). “Although mortgage rates have eased, market rates continue to exceed current rates for most homeowners keeping them locked in ‘golden handcuffs.’”
In 2020 and 2021, mortgage rates fell below 3% and hovered around that mark. Last year, however, rates passed 7%, keeping people locked in to their current arrangements as they looked to wait out the high rates.
Mortgage rates have fallen for the last few months (although they saw a slight uptick last week), with the current 30-year-fixed mortgage rate still hovering somewhere above 6%. Goldman Sachs (GS) expects the 30-year conforming mortgage rate to reach 6.0% by year-end and 6.05% in 2025.
This will likely help loosen up some supply, as homeowners may begin to feel more willing to move as mortgage rates continue to drop. That will be especially true in cities with a higher share of mortgages, where “golden handcuffs” have constrained supply for the last couple of years.
These are the 10 U.S. metropolitan areas that have the highest share of owner occupied homes with a mortgage — and consequently, the cities that could see the most movement as rates fall, according to Realtor.com.
10. San Diego-Chula Vista-Carlsbad, California
The San Diego-Chula Vista-Carlsbad metro area in California has a 68.9% share of owner occupied homes with a mortgage — the tenth-highest in the country, according to Realtor.com.
9. Indianapolis-Carmel-Anderson, Indiana
In the Indianapolis-Carmel-Anderson metro area, 69.0% of occupied homes have a mortgage.
8. Atlanta-Sandy Springs-Alpharetta, Georgia
The Atlanta-Sandy Springs-Alpharetta metro has a 69.4% share of lived-in homes with mortgages.
7. Seattle-Tacoma-Bellevue, Washington
And the same goes for the Seattle-Tacoma-Bellevue metro, again with a 69.4% mortgage share.
6. Baltimore-Columbia-Towson, Maryland
In Baltimore-Columbia-Towson, 69.5% of owner occupied homes have a mortgage.
5. Portland-Vancouver-Hillsboro, Oregon-Washington
Coming in at no. 5 is the Portland-Vancouver-Hillsboro metropolitan area, which is shared between Oregon and Washington, where 69.8% of owner occupied homes have a mortgage.
4. Virginia Beach-Norfolk-Newport News, Virginia-North Carolina
In the shared Virginia and North Carolina metro area of Virginia Beach-Norfolk-Newport News, 71.0% of homes that are currently occupied have a mortgage.
3. Raleigh-Cary, North Carolina
North Carolina’s Raleigh-Cary metro area has the third-highest share of mortgages in the country, with 72% of owner occupied homes in “golden handcuffs.”
2. Denver-Aurora-Lakewood, Colorado
Coming in at no. 2 is the Denver-Aurora-Lakewood, where 72.4% of owner occupied homes have a mortgage.
1.Washington-Arlington-Alexandria, DC-Virginia-Maryland-West Virginia
The metro with the most “golden handcuffs” is the Washington-Arlington-Alexandria area. In this sprawling region, 74.7% of owner occupied homes have a mortgage, according to Realtor.com.