Current Challenge: Rate-Locked Homeowners

Many homeowners are “rate-locked” into rock-bottom mortgages, unwilling to give up their golden interest rates — and that’s choking the supply of homes for sale. Instead of selling, many choose to rent their properties, keeping would-be buyers on the sidelines.

The result? National home sales in the first half of the year plunged to 30% below historic norms. Housing inventory is at its scarcest point since 1997 — when the U.S. population was nearly a third smaller.

Roughly 75% of American homeowners are sitting on mortgage rates under 5% — a deal they’re unlikely to see again in their lifetime. That’s created a “rate-locked” market, where even major life events — a new baby, a divorce, a job relocation — often end in people deciding to stay put rather than downgrade to a smaller home with a bigger interest rate.

The affordability gap is staggering. More than half of Americans couldn’t afford to buy their own home at today’s rates. A decade ago, the typical first-time homebuyer was 31. Now? They’re 38 — largely thanks to rising prices and stagnant supply.

The market is frozen. The question is, for how long? And what will finally thaw it?

Economists expect home prices and rates to dip by about 1% next month — but that’s barely a dent. What’s needed is far bigger:

• More housing construction.

• Looser zoning laws to allow for denser, more affordable builds.

• Targeted tax reform — especially on vacant, unused properties — to push more homes onto the market. Cities like Detroit are already exploring a “use it or lose it” approach.

• Broader economic change — more jobs, more affordable education, and stronger financial foundations for young buyers.

Without bold action, we risk locking an entire generation out of homeownership — and that’s a price too high for any economy to pay.