Home sales remain slow, but a gradual loosening of mortgage rate lock-in is helping more homeowners move, especially where life changes outweigh rate concerns, according to First American.
The housing market may finally have gotten a modest holiday boost. After years of frozen activity, signs are emerging that mortgage rate lock-in (the force keeping many homeowners stuck in place) is beginning to loosen its grip.
Existing-home sales rose in October, and forecasts point to another small increase in November. While overall activity remains well below pre-pandemic levels, the recent uptick suggests the market is starting a slow and uneven thaw. One key reason is that mortgage rate lock-in, which has weighed heavily on sales since 2022, is no longer getting worse.
Rate lock-in happens because most homeowners either bought or refinanced during the ultra-low mortgage rate period of 2020 to early 2022. When rates surged afterward, many owners were reluctant to sell. Giving up a low-rate mortgage to take on a much higher one would mean a sharply higher monthly payment, making staying put the better financial choice. Because most buyers are also sellers, this hesitation slowed the entire housing market.
That dynamic is beginning to shift. The gap between the low rates homeowners are paying and the higher rates faced by new buyers peaked in late 2023 and has gradually narrowed since. Mortgage rates have come down from their highs, and more homeowners now hold loans that aren’t dramatically cheaper than today’s rates. Lock-in still exists, but it’s no longer tightening.
The impact varies widely by state. In places like California and Hawaii, where many owners locked in especially low rates and home prices are high, sales remain well below normal. In contrast, states such as South Dakota and Arkansas show less lock-in pressure, and home sales there have recovered more quickly. These differences help explain why some markets feel stuck while others are seeing more movement.
It is important to note that lower rates alone aren’t driving this change. Life events (think new jobs, growing families, downsizing, or relocation) are slowly pushing homeowners to move despite higher borrowing costs. Over time, these personal factors reduce the share of owners holding ultra-low-rate mortgages, helping restore turnover.
The post A Small Thaw in the Housing Market as Mortgage Lock-In Factor Eases first appeared on The MortgagePoint.
