Millions of homeowners are clinging to their pandemic-era mortgage rates like idlers cling to driftwood. That stubbornness is resetting the rule book for investors.
A new survey of 1,000 mortgage holders by Best Interest Financial and Smart Real Estate found that 35% of homeowners with mortgage rates below 6% would not leave it for any reason. Among those with rates less than 3%, that figure rose to 52%.
Nearly half of those surveyed—47%—said they Only If they had to start over, they couldn’t afford a mortgage at today’s rates. The result is a housing market in which LuckBeen frozen for three years.
The lock-in effect isn’t going anywhere—here’s what it means
Through 2022, annual home sales have fallen to their lowest level — about 4.1 million — since the mid-90s, when the U.S. population was 22% smaller, according to wall street journal.
There is a dire need for more housing. However, according to data cited by the Intercontinental Exchange magazine54% of primary homeowners are sitting on rates of 4% or less – and, as the Best Interest Financial and Clever Real Estate survey revealed, many of them don’t intend to sell.
For homeowners currently renting, this means this: every family priced out of buying is another family looking for a quality rental.
While the Trump administration had stated the housing shortage to be 10 million units realtor.com And Zillow Last year it was at half the amount.
It’s all about supply and demand. Demand far exceeds supply, meaning homeowners are cornering one of this economy’s most prized assets: housing.
Affordability continues to keep buyers away
Dr. Jessica Lotz, NAR’s Deputy Chief Economist, said, Realtor.com press release: :
“For many young families, affordability challenges and limited inventory still make it difficult to achieve homeownership. Older Millennial buyers are now entering middle age, and with that comes a change. This group is now the highest earning generation of home buyers, buys biggest house, And Is Most likely their children will live with them. Those traits were once commonly associated with Gen X buyers, who are now increasingly empty-nesting and looking toward retirement.
However, further complicating the housing supply chain is that Baby Boomers, ages 61-79, are making the majority of real estate transactions – 42% of buyers and 55% of sellers – taking advantage of their larger home equity To score deals, young buyers were left out.
Lotz added:
“Baby Boomers are at a point in life when they have the flexibility to move up, often with housing equity to help them purchase their next home. In earlier years, baby boomers—like today’s millennial generation—may have moved due to change job or is required a big house. Today, many Baby Boomers are embracing the choice and moving to live closer to friends and family, downsizing, or retiring and enjoying a work-free lifestyle.
Mortgage interest rates are keeping the market stable
With interest rates still in the low-6% range and no end in sight, it looks like potential buyers will be renting for a while yet.
“We estimate mortgage rates will be between 6% and 6.5% this year, and our latest weekly data shows it is moving toward the upper end of that range,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association. bankrate.com in March.
While the Bankrate article pointed to a gradual decline in 3% interest rates as some owners were forced to sell due to growing families or job relocation needs, it also cited a report from the insurance company first american Which is related to going to a geographical location. Expensive states like California were less likely to give up their low interest rates than less expensive places.
Rental market fundamentals remain strong
You’ve probably heard mixed reviews about the current rental market. apartmentlist.comThe report for April 2026 shows that rents are increasing month on month but decreasing by 1.7% year on year. it This is partly due to the sharp rise in rents following the pandemic, economic complications, affordability issues, and the war with Iran.
However, this is likely a temporary situation, given the severe housing shortage, which is likely driving rents up, as has been the case over the past few months.
most recently BigPockets Pulse Survey There was a slight decline in optimism among landlords, as shown by the modest decline in rents over the past year. However, long termWith low inventory, high rates, and high prices, owning a rental property remains almost inflation-proof because people will always need a place to live.
“Real estate is in recovery mode,” said Henry Chin, global head of research at commercial brokerage CBRE. US News & World ReportBut it also adds that the focus has shifted from price appreciation to stable income. “Investors should look at the cyclical and structural approach to choose the right asset and location.”
Regarding the economic uncertainty resulting from the Iran war, Chin said, “Developed countries are front and center of investors’ minds as demand from occupiers continues to recover,” adding that “the US is more resilient than Europe”, which is more dependent on foreign oil than the US.
Other experts interviewed in the same article agreed. Edward F., senior vice president of research at Nareit (National Association of Real Estate Investment Trusts). “Interest rates are just one piece of the puzzle, not the defining factor,” says Pierzak. “What matters most is the macroeconomic backdrop.”
Emotion echoed “Investors should be thinking about real estate,” said Roland Chow, financial planner and portfolio manager at Optura Advisors in Burlingame, California. portfolio diversifier And, in the current high-interest rate environment, as an income source and inflation hedge.”
final thoughts
with continual Housing barriers and homeowners are reluctant to part with Low rates make it a great time to buy if you can. However, this is not the case blindfolded Throwing darts and choosing a location on the country map.
The US housing market is not monolithic. Although there are always ups and downs in cities, by far the best places to invest today are generally Midwest and SunbeltThat’s assuming you want to stay away from expensive metropolises like San Jose, San Francisco, and the New York tristate area — with a smattering of locations in the Northeast, according to a recent Zillow analysis.
In the current economic environment, low price points are a major driver. “A big component of buyer friendliness is affordability,” Cara Ng, a senior economist at Zillow, told CNBC. “(The Midwest) was affordable before the pandemic, and it’s affordable after the pandemic.”
