Locked In and Holding Out: How Low Mortgage Rates Are Freezing the Housing Market
Locked In and Holding Out: How Low Mortgage Rates Are Freezing the Housing Market
The U.S. housing market is grappling with a persistent shortage of homes, and one major reason is the “lock-in effect.” Homeowners with ultra-low mortgage rates secured during the pandemic are reluctant to sell, even as market demand grows. This hesitance is tightening inventory, driving up prices, and reshaping the dynamics of both buying and selling real estate in 2025.
The Lock-In Effect: A Silent Force Shaping the Market
In 2025, the American housing market is being influenced by an invisible barrier—known as the “lock-in effect.” This term describes a situation where homeowners, having secured historically low mortgage rates in 2020–2021, are now unwilling to sell their homes. With current mortgage rates exceeding 6.5%, many are choosing to hold onto their properties rather than trade their low rates for much higher ones. This is contributing to a serious shortage of homes on the market.
How Ultra-Low Pandemic Rates Created a Housing Freeze
To understand why so many homeowners feel “trapped” in their homes, we need to look back to the early days of the COVID-19 pandemic. In 2020, the Federal Reserve slashed interest rates to support the economy, causing mortgage rates to fall below 3%—a historic low. Millions of Americans locked in those rates by buying or refinancing homes. According to Redfin, over 80% of mortgage holders now enjoy rates below 4%. For these homeowners, selling now would mean accepting a new mortgage at nearly double the interest rate, drastically increasing their monthly payments. As a result, many are choosing not to move.
Low Inventory, High Prices: The Supply Crunch Intensifies
This reluctance to sell has triggered a sharp drop in inventory. The National Association of Realtors reports that active home listings in 2025 are still about 30% lower than before the pandemic. At the same time, demand from buyers remains relatively strong, especially from millennials and Gen Z buyers entering the market. This imbalance is keeping home prices high, even as affordability declines. In competitive cities like Austin, Charlotte, and San Diego, prices continue to rise due to limited supply, despite higher borrowing costs.
Adapting to the New Normal in Real Estate
Both buyers and sellers are changing how they approach the market. Homeowners who do choose to sell often list their homes at premium prices, knowing that competition is tight. Some sellers are also choosing to rent out their homes instead of selling, further limiting available inventory. On the buyer side, many are turning to new home construction, where builders are offering incentives like interest rate buydowns to attract buyers. Others are expanding their home search to more affordable suburbs or rural areas, while some postpone buying altogether in hopes that interest rates will fall.
Beyond Housing: Ripple Effects Across the Economy
The lock-in effect isn’t just a real estate issue—it’s affecting the broader economy. With fewer people moving, job mobility has decreased, making it harder for workers to relocate for better opportunities. Businesses tied to real estate—like moving companies, home inspectors, contractors, and agents—are experiencing a slowdown. First-time buyers, especially, are struggling to find entry-level homes, as current homeowners delay selling. Policy discussions are beginning to focus on potential solutions, such as tax credits for sellers or “portable mortgages” that allow homeowners to transfer their lower rates to new properties.
What’s Next: Can the Market Move Again?
In conclusion, the lock-in effect is one of the key forces shaping the U.S. housing market in 2025. It keeps millions of homes off the market, pushes prices upward, and limits opportunities for buyers and sellers alike. Unless interest rates drop significantly or new policy tools are introduced, many homeowners will remain in place—slowing mobility and maintaining the market’s supply crunch. The challenge now is finding ways to unlock movement and restore balance to the housing ecosystem.
Jack C Bharat
AmeriGroup Residential & Commercial Properties. Inc.
122-15 111th Avenue, S Ozone Park, NY 11420
Email: jackcbharat@gmail.com
Phone: (718) 805-6982
Jack C Bharat has been in the Real Estate Business since 2003. As a Realtor & Developer, his experience in buying dated, distress or fixer upper and renovated them back for resale can help both buyers and sellers in their transactions. Graduated in 1999 from Queens College (CUNY) Flushing, with a Bachelors of Arts Degree and in 2012 from LaGuardia College with Goldman Sachs 10K Small Business Certificate Of Entrepreneurship, Mr Bharat is always educating himself to stay current and sometimes ahead of Real Estate Market Trends. He is currently a Notary Public in the State of NY as well.
Mr Bharat has completed real estate projects in New York-Queens & Long Island, Florida-Ocala & Coral Springs & recently (Nov 2023) 8 Units Apt in Providence, Guyana. His passion for creating projects that blend functional modern architectural design in harmony with the natural environment are evident in his most recent commercial project in Providence Guyana, currently under initial phase of construction. Mr Bharat also is the CEO of Liberty Office Supplies & Equipment, Inc. A Certified Minority Business Enterprise (MBE) with New York City & New York State. Established in May 1999, Liberty provides a wide range of office supplies and work as a sourcing company for the Federal Government by being a GSA schedule holder.
Jack is Licensed as a Real Estate Broker in State of New York and in the State of Florida. He has knowledge in both residential and commercial sales. His motto “Working with Clients to achieve their real estate goals” is what drive him to be on top of his game. He is very involved in his community especially with social and educational issues. He is the proud sponsor of a local Cricket Team, Boxing and donates his time and money to various organizations that work with children, abuse victims and the elderly. He is cited by NYC Mayor’s Office, NYS Assembly and NYC Council for his leadership role in his community.
Mr Bharat has three daughters: Alicia who graduated with her Masters Of Science in Education from Queens College and is now a STEM Teacher with the NYC Dept of Education, Kayla who has recently (2024) graduated from CUNY School for Public Health with her Masters of Public Health in Environmental & Occupational Health Sciences & works as an Environmetal Health & Safety Specialist with Sloan Kettering Cancer Ctr. and Jessica who is currently enrolled as a senior at Queens College pursing her goal as a Dentist.
Mr Bharat has completed real estate projects in New York-Queens & Long Island, Florida-Ocala & Coral Springs & recently (Nov 2023) 8 Units Apt in Providence, Guyana. His passion for creating projects that blend functional modern architectural design in harmony with the natural environment are evident in his most recent commercial project in Providence Guyana, currently under initial phase of construction. Mr Bharat also is the CEO of Liberty Office Supplies & Equipment, Inc. A Certified Minority Business Enterprise (MBE) with New York City & New York State. Established in May 1999, Liberty provides a wide range of office supplies and work as a sourcing company for the Federal Government by being a GSA schedule holder.
Jack is Licensed as a Real Estate Broker in State of New York and in the State of Florida. He has knowledge in both residential and commercial sales. His motto “Working with Clients to achieve their real estate goals” is what drive him to be on top of his game. He is very involved in his community especially with social and educational issues. He is the proud sponsor of a local Cricket Team, Boxing and donates his time and money to various organizations that work with children, abuse victims and the elderly. He is cited by NYC Mayor’s Office, NYS Assembly and NYC Council for his leadership role in his community.
Mr Bharat has three daughters: Alicia who graduated with her Masters Of Science in Education from Queens College and is now a STEM Teacher with the NYC Dept of Education, Kayla who has recently (2024) graduated from CUNY School for Public Health with her Masters of Public Health in Environmental & Occupational Health Sciences & works as an Environmetal Health & Safety Specialist with Sloan Kettering Cancer Ctr. and Jessica who is currently enrolled as a senior at Queens College pursing her goal as a Dentist.
