A quiet shift with major consequences
After years of gridlock, the U.S. housing market may be entering a new phase. The mortgage lock-in effect that froze millions of homeowners in place during the post-pandemic rate surge is beginning to weaken, according to new data analysis from real estate investor and Reventure CEO Nick Gerli.
The U.S. housing market mortgage lock-in emerged after pandemic-era buyers secured mortgage rates below 3 percent, levels unlikely to return. As rates climbed into the 6 percent and higher range, many homeowners opted to stay put rather than sell and reenter the market at far higher borrowing costs. That decision dramatically restricted housing supply, especially for first-time buyers.
Gerli says that dynamic is now changing in a meaningful way.
Why the lock-in effect is losing its grip
By the end of 2025, more homeowners held mortgages with rates above 6 percent than those locked into ultra-low sub-3 percent loans, according to Gerli’s analysis of Fannie Mae mortgage data. That crossover marks the end of one of the most generous financing periods in modern housing history.
In a January post, Gerli described the moment as a turning point, noting that the once dominant pool of pandemic-era borrowers has steadily declined as new mortgages are issued at higher rates and older homeowners refinance, relocate, or sell.
The shift matters because homeowners with rates closer to current market levels face less financial friction when moving. With fewer owners anchored to unusually cheap debt, the incentive to sell, downsize, or trade up improves. Over time, that could help unlock inventory that has been scarce for nearly four years.
Inventory pressure and the first-time buyer squeeze
The lock-in effect has had real consequences. With fewer homes hitting the market, younger buyers faced intense competition for a limited supply of starter homes. Bidding wars became common, prices climbed, and affordability eroded.
According to the National Association of Realtors, the average age of a first-time homebuyer climbed to 40 in 2025, while the share of first-time buyers fell to a record low of 21 percent. That represents a 50 percent decline from pre-Great Recession levels.
Economists point to inventory shortages as a central factor. When homeowners are financially discouraged from selling, supply tightens regardless of demand. Gerli argues that as the mortgage mix normalizes, that pressure could gradually ease.
Each year, even in a slow market, roughly 5 to 6 million Americans take out new mortgages. Since 2022, most of those loans have been issued at rates above 6 percent, steadily reshaping the overall mortgage landscape.
Rates are easing, but affordability remains strained
Mortgage rates have retreated from their peak near 8 percent in late 2023, settling into the low-6 percent range. While that decline offers some relief, rates remain more than double pandemic-era lows, and few economists expect a return to sub-3 percent borrowing absent a major global shock.
Gerli notes that even a sustained move modestly below 6 percent could help encourage more listings, especially among homeowners who delayed selling during the height of rate volatility.
Still, broader affordability challenges remain. Home prices are roughly 50 percent higher than before the pandemic, and wage growth has not kept pace. Bankrate estimates that more than 75 percent of homes on the market are now unaffordable for the typical U.S. household, with many buyers falling tens of thousands of dollars short of qualifying income.
In high-cost coastal markets, affordability gaps are even more pronounced. Recent analyses suggest that in cities like New York, Los Angeles, and San Francisco, median-income households could not afford median-priced homes even with dramatically lower mortgage rates.
What 2026 buyers should realistically expect
The fading mortgage lock-in effect is a positive structural development, but it is not a cure-all. More inventory could ease competition at the margins, yet affordability is shaped by a complex mix of rates, prices, wages, taxes, and insurance costs.
Housing analysts broadly agree that without significant income growth, major price corrections, or a sharp decline in borrowing costs, homeownership will remain out of reach for many Americans.
For buyers heading into 2026, the market may feel less frozen than in recent years, but still far from forgiving. The next phase of the housing cycle appears to be about gradual adjustment rather than dramatic relief.
