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Millions of homeowners are clinging to their pandemic-era mortgage rates like castaways clutching driftwood. That stubbornness is resetting the rulebook for investors.
A new survey of 1,000 mortgage holders by Best Interest Financial and Clever Real Estate found that 35% of homeowners with a mortgage rate under 6% would not give it up for any reason whatsoever. Among those with rates under 3%, the figure jumped to 52%.
Nearly half—47%—of those surveyed said that they simply couldn’t afford a mortgage at today’s rates if they had to start over. The result is a housing market that, according to Fortune, has been frozen for three years.
The Lock-In Effect Is Not Going Anywhere—Here’s What That Means
Since 2022, annual home sales have dropped to their lowest level—approximately 4.1 million—since the mid-90s, when the U.S. population was 22% smaller, according to the Wall Street Journal.
There is a desperate need for more housing. However, according to data from Intercontinental Exchange cited by the Journal, 54% of primary homeowners are sitting on rates of 4% or lower—and, as the Best Interest Financial and Clever Real Estate survey discovered, many of them do not intend to sell.
For landlords currently sitting on rentals, here’s what that means: Every family priced out of buying is another family looking for a quality rental.
The Trump administration put the housing shortage at 10 million units, while Realtor.com and Zillow had it at half that amount last year.
It’s all about supply and demand. Demand far outweighs supply, which means landlords are sitting on one of this economy’s most prized assets: housing.
Affordability Continues to Keep Buyers Away
Said Dr. Jessica Lautz, NAR deputy chief economist, in a Realtor.com press release:
“For many younger households, affordability challenges and limited inventory are still making homeownership difficult to achieve. Older millennial buyers are now entering middle age, and with that comes a shift. This cohort is now the highest-earning generation of homebuyers, buys the largest homes, and is most likely to have children living with them. Those traits were once more commonly associated with Gen X buyers, who are now increasingly looking toward empty-nesting and retirement.”
However, further complicating the housing supply chain is that baby boomers, those aged 61-79, are transacting most of the real estate—accounting for 42% of buyers and 55% of sellers—leveraging their considerable home equity to do deals, leaving younger buyers locked out.
Added Lautz:
“Baby boomers are at a point in life when they have the flexibility to move, often with housing equity to help purchase their next home. In earlier years, baby boomers—like millennials today—may have moved because of a job change or the need for a larger home. Today, many baby boomers are embracing choice and moving to be closer to friends and family, to downsize, or to retire and enjoy a work-free lifestyle.”
Mortgage Interest Rates Are Keeping the Market Frozen
With interest rates still in the low-6% range with no end in sight, it seems likely prospective buyers will remain renting for a while yet.
“We forecast that mortgage rates will range between 6% and 6.5% this year, and our latest weekly data show it’s trending towards the upper end of that range,” Mike Fratantoni, chief economist for the Mortgage Bankers Association, told Bankrate.com in March.
While the Bankrate article alluded to a gradual crumbling of 3% interest rates as some owners were forced to sell due to growing families or job relocation requirements, it also quoted a report from insurance company First American that tied moving to a geographic location. Those in pricier states, such as California, were less likely to give up their low interest rates than those in less expensive locations.
The Rental Market Fundamentals Are Holding Strong
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You’ve probably heard mixed reviews about the current rental market. ApartmentList.com‘s April 2026 report shows that rents are up month over month but down 1.7% year over year. This is due in part to the sharp increase in rents after the pandemic, economic complications, affordability issues, and the war with Iran.
However, it’s probably a temporary situation, given the overwhelming lack of housing, which is likely pushing rents up, as it has in the past few months.
The most recent BiggerPockets Pulse survey showed a slight downturn in optimism among landlords, as evidenced by slight rental decreases over the past year. However, long-term, with low inventory, high rates, and high prices, holding rental property remains almost inflation-proof because people will always need a place to live.
“Real estate is in a recovery mode,” Henry Chin, global head of research for commercial brokerage CBRE, told US News & World Report, but adds that the focus has shifted from price appreciation to steady income. “Investors should look at cyclical and structural points of view to pick the right assets and locations.”
Regarding the economic uncertainty posed by the Iran war, Chin said, “Developed countries are front and center of investors’ minds as occupier demand continues to recover,” adding that the “U.S. is more resilient than Europe,” which is more dependent on overseas oil than the U.S.
Other experts interviewed in the same article concurred. “Interest rates are just one piece of the puzzle, not the defining factor,” says Edward F. Pierzak, senior vice president of research at Nareit (the National Association of Real Estate Investment Trusts). “What matters most is the broader economic backdrop.”
The sentiment was echoed by Roland Chow, financial planner and portfolio manager at Optura Advisors in Burlingame, California, who said, “Investors should think of real estate as a diversifier to the portfolio and, in the current higher-interest rate environment, as an income source and inflation hedge.”
Final Thoughts
With a continual housing bottleneck and homeowners reluctant to part with low rates, now is a great time to buy if you can. However, it’s not a case of blindly throwing a dart at a map of the country and picking a spot.
The U.S. housing market is not monolithic. While there are always fluctuating cities, by far the best places to invest today are generally in the Midwest and Sunbelt, according to a recent Zillow analysis—with a smattering in the Northeast—assuming you want to keep away from pricier metros such as San Jose, San Francisco, and the New York tristate area.
In the current economic climate, lower price points are a key driver. “A huge component of buyer friendliness is affordability,” Kara Ng, a senior economist at Zillow, told CNBC. ”[The Midwest] was affordable before the pandemic, and it is affordable after the pandemic.”
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