BiggerPockets Daily Is the Lock-In Effect Finally Breaking?
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Feb 12, 2025 The discussion highlights the lock-in effect that has kept many homeowners stagnant, reluctant to sell due to higher mortgage rates. Recent data shows a rise in homeowners with rates above 6%, which could signal a shift in the real estate landscape. As more properties become available, the potential for a buyer's market looms. This evolving scenario raises important questions for buyers, sellers, and investors regarding future market trends and strategies.
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The Lock-In Effect
- The lock-in effect describes homeowners hesitant to sell due to low mortgage rates.
- It started when rates rose after the pandemic, trapping those with 2-3% rates.
Rising Mortgage Rates
- 17.2% of US homeowners now have mortgage rates of 6% or higher, the highest share since 2016.
- This share could double in three years, potentially weakening the lock-in effect.
New Normal for Mortgage Rates
- A "new normal" of 6-7% mortgage rates is emerging as homeowners adjust expectations.
- Rates may briefly dip to 4.5%, but the 5-7% range will likely persist.