Mortgage Rates Are Falling but Owners Still Won’t Sell

The invisible elephant in the room. Almost one in four single family homes are owned by investors. Most of these folks rent and got a sweet loan around 2+%. Problem is those mortgages are typically short term (lenders will typically not do long term investment mortgages). When they need to refinance, the numbers no longer work at higher interest rates. If these folks are forced to sell or get foreclosed on the new product on the market could cause housing prices to fall further.

Mortgage Rates Are Falling but Owners Still Won’t Sell

Nearly 30 million households, or 54% of primary mortgage-holders, have mortgage rates at or below 4%

By Nicole Friedman, WSJ

Dec. 20, 2025

Nearly 30 million households, or 54% of primary mortgage-holders, have mortgage rates at or below 4%.

Mortgage rates have fallen to their lowest level in a year, but millions of homeowners are still locked into ultralow mortgage rates they don’t want to give up.

Nearly 30 million households, or 54% of primary mortgage-holders, have mortgage rates at or below 4%. They were able to buy homes or refinance their mortgages when rates fell to 3% or lower in 2020 and 2021.

Now, many of those who want to move don’t feel it is worth it to buy a home and take on mortgage rates that have doubled.

This “lock-in effect” has helped freeze the housing market for three straight years, suppressing the number of U.S. homes for sale and keeping inventory well below historic levels for most of that period.

“We don’t expect to see this massive influx of home buyers, especially while mortgage rates are above 6%,” said Hannah Jones, senior economic research analyst at Realtor.com. “People can’t afford to move.”

Other factors continue to unsettle the market. Near-record home prices are leading many buyers to give up. Expenses related to homeownership, including home insurance and property taxes, have also risen in many places.

But mortgage rates remain a major stumbling block, despite having fallen in recent months.

Rates are unlikely to fall far enough to persuade many of those homeowners who want to sell to take on a far more expensive loan. Economists don’t expect significant declines in mortgage rates in the next year. The Mortgage Bankers Association forecast in December that the 30-year fixed mortgage rate would average 6.4% in 2026.

The Federal Reserve cut short-term interest rates this month but signaled it might be done with further rate cuts for now. Mortgage rates edged lower to 6.21% this week, holding near the one-year low reached in October, Freddie Mac said Thursday.

Kenneth Chen started a new job in northern Virginia last year, but it doesn’t make financial sense to sell his Chicago-area home and buy a new one in Virginia, he said. Chen is renting an apartment in Virginia but his wife and children still live in Illinois.

Chen’s mortgage rate on his Illinois house is under 3%. He estimated that buying an equivalent house in northern Virginia today would cost him at least $1,500 a month more.

“It’s just too big of a jump on a monthly basis—it would really impact our budget,” he said. “I’m just waiting for the interest rate to drop” before buying a home in Virginia, he said.

Other locked-in homeowners would face similar increases. A homeowner paying the current typical mortgage payment of $1,291 would have needed to pay $2,236, or 73% more, to buy a median-priced home in October 2025, according to a Realtor.com analysis. (News Corp, parent of The Wall Street Journal, operates Realtor.com.)

Home-buying activity has picked up recently. Declining mortgage rates, along with falling home prices in some parts of the country, are convincing some buyers to make a move. The inventory of homes for sale has also climbed, especially in the South and West, giving buyers more negotiating power.

Existing-home sales rose in November for the third straight month. Mortgage purchase applications in the week ended Dec. 12 rose 13% from a year earlier, according to the MBA.

“For buyers, you’re not getting a house as cheap as people got them in 2020, but it’s cheaper than it was in 2024 and 2023 and most of 2022,” said Mischa Fisher, chief economist at Zillow.

But overall purchase activity remains muted, and existing-home sales are on track for their third straight year near 30-year lows.

Economists say it could take years for affordability to improve significantly, as rising incomes catch up to home-buying costs.

“The people who have to move for a job, or whatever family reason, they are selling. But that’s just very few people,” said Chen Zhao, Redfin’s head of economics research. “The ones who have more discretion are electing not to sell. They’re staying put.”