"Mortgage rates have remained stubbornly high: hovering at more than 6%, well above the sub-3% rates during the pandemic. That makes homeownership increasingly unaffordable for many Americans, as home prices have risen more than 50% since 2020. During the pandemic, home buyers got accustomed to sub-3% mortgage rates, which made purchasing a house feel more achievable. But in the past couple of years, buyers have had no such luck."
"This summer, Zillow economic analyst Anushna Prakash reported mortgage rates would need to drop to 4.43% for a typical home to be affordable to an average buyer. But "that kind of a rate decline is currently unrealistic," Prakash wrote. Meanwhile, not even a 0% interest rate would make a typical home affordable in New York, Los Angeles, Miami, San Francisco, San Diego, or San Jose, she added."
""Many homeowners are reluctant [to] put their homes on the market and give up the low mortgage rates they already have," according to Berkshire Hathaway HomeServices. "To them, high price gains won't mitigate their ability to pay more for another home at significantly higher interest rates." This issue is also referred to as golden handcuffs-or the locked-in mortgage rate effect. The idea is that current homeowners have no incentive to put their homes on the market, even if they want to move,"
Mortgage rates have risen from pandemic sub-3% levels to persistently above 6%, peaking at 8% in late 2023 and remaining around 6.19% today. Home prices increased over 50% since 2020, intensifying affordability challenges. Analysts estimate rates would need to fall to roughly 4.43% for a typical buyer to afford a home, while some high-cost metros remain unaffordable even at 0% interest. High rates discourage listings because many homeowners hold low locked-in mortgages and are unwilling to give them up. The locked-in mortgage rate effect reduces housing supply and suppresses market mobility for buyers and sellers.
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