In this episode, we explore a powerful but often overlooked force keeping the real estate market locked tight — and why even new inventory won’t fix it.
📌 Key Takeaways:
- The real estate market is like a game of musical chairs — for someone to buy a home, someone else has to move out.
- Even if new homes come on the market, demand still outweighs supply.
- One semi-invisible but critical factor is holding the market in place: historically low interest rates.
- Homeowners with 2–3% mortgage rates are effectively “locked in” and have no incentive to sell or move.
- Moving from a 2% mortgage to 5% or higher creates a massive jump in monthly payments — even for a similarly priced house.
- Most homeowners would have to downgrade to maintain the same payment, which very few are willing to do.
- Going “up” in home size or price now means doubling monthly payments due to higher interest rates.
- Many homeowners will choose to invest in upgrading their current home instead of buying a new one.
- This mortgage “lock-in effect” dramatically reduces the number of homes available for resale.
- Even if homeowners rent out their current home and buy a new one, it does not increase overall housing inventory — it simply shifts ownership.
- Buyers coming from the rental market will bear the brunt of higher mortgage rates, but they aren’t impacting resale inventory.
- The housing shortage may worsen, as fewer homeowners list their homes due to this invisible financial disincentive.
🏡 Final Insight:
The true crisis in real estate isn’t just about home prices or new construction — it’s about a mortgage-rate trap that keeps homes off the market. Until interest rates drop or new solutions are found, don’t expect a flood of available homes anytime soon.
