AmiSight 1/5: Why Lower Mortgage Rates Still Aren’t Moving Homeowners

Although mortgage rates have fallen to their lowest level in a year, millions of homeowners are reluctant to give up their ultralow mortgage rates they secured during the pandemic.

Nearly 30 million households have mortgage rates at or below 4%, after they were able to buy homes or refinance their mortgages when rates fell to 3% or lower in 2020 and 2021. Now, many of those who want to move don’t feel it is worth it to buy a home and take on mortgage rates that have doubled.

The Wall Street Journal reports this “lock-in effect” has helped freeze the housing market for three straight years, suppressing the number of U.S. homes for sale and keeping inventory well below historic levels for most of that period.

Rates are unlikely to fall far enough to persuade many of those homeowners who want to sell to take on a far more expensive loan. Economists say it could take years for affordability to improve significantly, as rising incomes catch up to home-buying costs.

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