Real estate agents are feeling the pain: Housing market golden handcuffs are very real
Sat, June 24, 2023, 1:43 PM EDT
Back in the late 1970s, the term
golden handcuffs was popularized as a way to explain why ambitious professionals were choosing to stay put rather than explore other employment options. The reason being, of course, that their employers were spoiling them with generous above-market compensation—including stock options—and benefits.
Fast-forward to 2023, and the term
golden handcuffs can also be used to explain why
many homeowners who'd like to move are instead choosing to stay put. See, if these homeowners did choose to sell their home and buy something new, they'd likely be giving up their 2% to 3%
mortgage rate and taking on something in the 6% to 7% ballpark. That potential mortgage rate payment shock is just too pricey for many would-be move-up buyers to stomach.
If a borrower were to take on a $500,000 mortgage at a 3% interest rate, they'd owe a monthly $2,108 principal and interest payment over the course of the 30-year loan. However, at a 7% mortgage rate, that payment would be $3,327 per month.
Simply put: The 2% and 3% mortgage rates—which were a policy outcome of the COVID-19 recession—are
acting as golden handcuffs.