Lock-In Effect: What does it mean for inventory and new home buyers?

There are significant shift in the U.S. housing market: the rise of 6%-plus mortgage rates as the new norm.

• Mortgage Rate Shift: The share of U.S. homeowners with a mortgage rate of at least 6% has nearly tripled in three years, rising from about 7% in mid-2022 to nearly 20% today (Q2 2025). The average 30-year fixed rate was 6.30% last week.
• The “Lock-In Effect” is Fading: The sub-4% mortgage rate era (late 2019 to early 2022) was an anomaly, and the trend of owners clinging to those low rates is beginning to ease. Just 53% of mortgaged homeowners now have a rate below 4%, down from a peak of 65% in early 2022.
• Implications for Inventory: The increase in 6%-plus mortgages suggests the lock-in effect is easing, driven by homeowners’ life needs (jobs, family growth, downsizing) starting to outweigh the financial benefit of a rock-bottom rate. This is causing for-sale inventory to return to pre-pandemic levels in many parts of the country.
• Stalled Sales: Despite the uptick in inventory, a major jump in sales has not occurred because prospective buyers remain on the sidelines. Buyers are waiting for rates to fall low enough to make a significant difference in their monthly payment. The “magic number” cited by one investor to get buyers off the sidelines is 5.5%.
• Fed Impact: The Federal Reserve’s recent rate cut did not bring mortgage relief and was already priced into the markets, with mortgage rates even ticking up slightly last week.

What this means for the housing market in the next 12 months.

The housing market will likely remain in a state of gradual thawing and stabilization over the next 12 months, characterized by slowly improving inventory but stubbornly low transaction volume (sales).

• Mortgage Rates: Rates will face downward pressure but remain elevated. While there is market expectation of Federal Reserve rate cuts into 2026, most forecasts suggest the 30-year fixed rate will only modestly ease into the low-to-mid 6% range by the end of 2026, with an expectation to end 2026 around 5.9% to 6.3%. The key threshold of 5.5% is unlikely to be reached broadly within this 12-month window.
• Inventory (Supply): Inventory will continue to slowly increase. As more homeowners who recently refinanced or purchased at rates of 6% or higher feel less “locked-in” compared to the sub-4% cohort, and as life events continue to drive moves, supply will improve. This loosening of the lock-in effect will prevent a price collapse but will contribute to a deceleration of home price appreciation.
• Sales (Demand): Sales volume will remain low, near 30-year lows, for most of the period because affordability is still the primary hurdle. The current high prices combined with 6%+ rates mean the market will not see a major rebound until rates drop significantly below the mid-6% range. A noticeable rebound in sales is currently forecast for 2026, but the start of that rebound will be gradual.

Conclusion: The market will continue to be bifurcated: modest price gains will be supported by persistent supply constraints in high-demand areas, but sales volume will only creep up as most buyers remain on the sidelines, waiting for a meaningful decline in monthly payments.

Credit: Andrew Dorn

Source: Nexstar Broadcasting Inc https://www.floridarealtors.org/news-media/news-articles/2025/10/lock-effect-shows-early-signs-easing