Mortgage Lock‑In Keeps Homes From Moving

Most homeowners are trapped by cheap loans they can’t easily replace.
80‑85 % of mortgages are under 5 %, many set when rates were below 3.5 %. Today’s average rate is above 6.8 %, turning a sale into a costly switch.

The Cost of Moving

• $400,000 loan at 3 %
• Monthly payment: ≈ $1,600.50
• Same loan at 6.9 %
• Monthly payment: ≈ $2,600
• Difference: almost $1,000 extra per month

This monthly jump keeps most people rooted unless a job change or family need forces a move.

Supply Shrinks, Prices Stay High

• Homes for sale are at their lowest since the mid‑1990s.
• Demand is rising (more families forming, young buyers eager).
• Low supply → high prices.
• Buyers struggle with steep price‑to‑income ratios, especially on the coasts.

Builders’ Quick Fixes

• Rate buy‑downs: lower mortgage rate for a few years or cover closing points.
• Effect: cheaper upfront, but doesn’t change the high‑rate environment.
• New homes cluster in Sun Belt cities (Phoenix, Dallas, Austin) where land is cheaper.
• Coastal areas see nearly zero new supply due to strict zoning and high construction costs.

Seller’s Dilemma

• Wait: until rates drop enough to eliminate lock‑in penalties.
• Sell now: accept higher costs but use existing equity as a cushion.
• Purely rate‑driven sellers face little relief; central bank policy signals only a gradual, modest decline in rates.

What to Expect This Summer

• Pattern repeats: few homes available, strong prices in most places, sales below population‑growth expectations.
• Buyers’ strategy: plan for this reality instead of hoping the market will fix itself.