The housing market is being held back by homeowners who were fortunate enough to obtain historically low mortgage interest rates during the pandemic, according to new Realtor.com data.
Homeowners increased their equity by selling their properties for decades before the COVID-19 pandemic, but the stable housing paradigm has been upended, according to recent analytics by Cotality.
As of the second quarter of 2025, more than half of American homeowners (52.5%) have an interest rate below 4%, according to a recent Realtor.com analysis that is supported by Cotality statistics. The present rates, which have been trapped in the low- to mid-6% area for the past few months, are two percentage points lower than that.
Home Sellers Unwilling, But May be Forced to Let Go of Low Rates
Homeowners are aware that the difference between a 4% and a 6% mortgage rate can result in monthly savings of hundreds or even thousands of dollars, placing them in what the Cotality report’s authors refer to as “golden handcuffs.”
To put it another way, a homeowner with a 3% mortgage rate would be reluctant to sell their home because they do not want to give up their low rate, which would reduce the number of new listings and sales.
“This is particularly true for move-up buyers, empty nesters, and those who would otherwise relocate,” said Dr. Selma Hepp, Chief Economist at Cotality. “In some markets, inventories remain more than 50% below pre-pandemic levels.”
Between 2022 and 2024, the “lock-in effect” is predicted by the Federal Housing Finance Agency to have prevented 1.72 million house sales.
“Overall transaction volume—especially for existing homes—has plummeted to multi-decade lows,” Hepp said. “The friction of the high cost of moving has stalled the normal churn of the housing market.”
According to Realtor.com’s September 2025 monthly housing market trends report, the U.S. housing supply has been significantly impacted by homeowners’ unwillingness to sell due to today’s higher mortgage rates, with inventory growth slowing since May.
Although it varies greatly by area, the national inventory is still around 14% below pre-pandemic levels. The Northeast and Midwest are still woefully undersupplied, whereas the South and West currently have more properties for sale than in 2019.
Additionally, the limited housing supply generates scarcity and maintains high prices, even as the high mortgage rates are reducing buyer desire.
The national median list price in September was $425,000, which was the same as it was a year earlier, but it increased per square foot in the Midwest and the low-inventory Northeast.
“The lack of supply often creates a tight market, increasing the ratio of buyers to sellers,” Hepp explained. “Markets with the largest scarcity of homes for sale continue to see the strongest price growth despite affordability challenges.”
High Mortgage Rates, Home Prices Remain a Hurdle for Buyers & Sellers
Due to the current high mortgage rates, persistently high prices, and overall economic uncertainty, potential purchasers are frequently reluctant to approach the table, even when homeowners are prepared to sell.
It should come as no surprise that the average listed home last month sat on the market for 62 days, which is one week longer than it was a year ago.
“For first-time buyers or those who must move, the combination of high home prices and high interest rates creates a severe affordability challenge, locking them out of homeownership,” Hepp said.
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