The U.S. housing market is undergoing a major shift as more homeowners find themselves locked into mortgage rates of 6% or higher. According to real estate brokerage Redfin, 17.2% of homeowners now have a mortgage rate of at least 6%, up from 12.3% in late 2023. This marks the highest percentage since 2016 and signals a change in how homeowners, buyers, and renters navigate the market.
For years, many homeowners stayed put, unwilling to trade their low pandemic-era mortgage rates for today’s higher borrowing costs. This “lock-in effect” reduced housing supply and kept prices high. However, new data suggests that this trend is starting to ease, creating fresh opportunities in both the homeownership and rental markets.
Breaking the Lock-In Effect
The pandemic created historically low mortgage rates, with some homeowners securing rates as low as 2.65%. As a result, many were reluctant to sell their homes when rates started rising, leading to a tight housing supply and continued price growth. But now, that hesitation is fading.
According to Redfin, more homeowners are deciding to move despite high rates. Life circumstances—such as job relocations, growing families, or financial shifts—are forcing many to reconsider their options. Some homeowners are even leveraging the equity gained from rising home values to make their next move more affordable.
Home prices have surged over the last few years, giving many homeowners financial flexibility. Data from the Federal Reserve Bank of St. Louis shows that the average U.S. home price was $383,000 in early 2020. By the end of 2024, that number had jumped 33% to $510,300. This equity growth allows sellers to make a profit even in a higher-rate environment, especially if they are downsizing or moving to a more affordable location.
Homebuying and Mortgage Demand in a High-Rate Market
With mortgage rates remaining above 6% for over two years, affordability remains a challenge for many buyers. According to the Mortgage Bankers Association (MBA), mortgage applications for home purchases have declined, while refinance applications surged 12% in early 2024 as homeowners looked for opportunities to adjust their loans.
Joel Kan, MBA’s Deputy Chief Economist, noted that the average loan size for home purchases has increased since the beginning of the year, reflecting rising home prices. However, Freddie Mac Chief Economist Sam Khater pointed out that mortgage purchase applications are slightly above last year’s levels, suggesting that demand still exists despite affordability concerns.
Many buyers are adjusting their expectations, looking at smaller homes, more affordable neighborhoods, or alternative financing options. Adjustable-rate mortgages (ARMs) and lender incentives are becoming more popular as buyers seek creative solutions to enter the market.
The Rise of the Build-to-Rent Market
As homeownership becomes less attainable for some, the rental market is expanding—especially the build-to-rent sector. A report from real estate listing platform Point2Homes shows that over 110,000 single-family rental homes are currently under construction across the U.S. Texas leads the nation with nearly 22,000 build-to-rent homes in development, followed by Arizona, Florida, and North Carolina.
Build-to-rent communities are designed specifically for renters and offer amenities similar to traditional homeownership, such as private yards and garages. These communities appeal to families and individuals who prefer the flexibility of renting without the financial burden of a mortgage.
Doug Ressler, manager of business intelligence at Yardi Matrix, highlights the growing affordability gap between renting and buying. “Recent reports indicate that renting can save one around $1,000 per month compared to buying. This is largely due to high mortgage rates and elevated home prices,” he said.
Additionally, more renters are choosing to rent by preference rather than necessity. In 2024, 36% of build-to-rent residents identified as renters by choice, up from 27% in 2023. This shift reflects changing attitudes toward homeownership and the growing appeal of rental living.
Opportunities in a Changing Market
Despite rising mortgage rates, the housing market is not stagnant—it is evolving. More homeowners are making moves, buyers are adjusting their strategies, and the rental market is expanding. For real estate professionals, lenders, and investors, this presents new opportunities.
Sellers with significant home equity may find it worthwhile to sell, even in a higher-rate environment. Buyers who remain flexible and explore financing alternatives can still enter the market. Investors and developers can capitalize on the demand for rental housing, particularly in the build-to-rent sector.
While challenges remain, those who adapt to these changes can position themselves for success. The market is shifting, and with it comes opportunity for those ready to embrace it.