This is an excerpt from our most recent Economic Outlook report. To access the full PDF, please click here.
This scenario is unique: A large chunk of the existing U.S. housing supply is locked into super low fixed COVID-era mortgage rate finance terms.
The average 30-year fixed U.S. mortgage rate sat at 3.11% in 2020 and 2.96% in 2021.
According to Redfin analysis undertaken on Sept. 25th, 2025 (a year ago):
- ~48-52% of existing U.S. mortgages carried a rate lower than 4.0%, while
- ~20% of active U.S. mortgages remained locked in below 3.0%
The mortgage data Redfin used was drawn from the FHFA’s National Mortgage Database.
Unprecedented FOMC policy manipulation of underlying U.S. mortgage finance, explains why U.S. housing inventory has remained tight, to late 2026. And likely, in 2027 and 2028.
What was the National Average for a new 30-yr fixed mortgage on Sept. 17th? 7.05%.
A sticky or higher than 5.0% yield on the benchmark 10-year U.S. Treasury note signals a significant upward surge for U.S. 30-year fixed mortgage rates, likely pushing them into a range of 7.5% to 8.0%.
That leads me to these conclusions:
Few locked-in U.S. homeowners, not under moving or job market stress, will willingly swap 2.5x, from a ~3.0% 30-year fixed rate mortgage, into a 7.5% or even 8.0% loan.
Therefore, existing overall U.S. home sales are likely to remain muted in 2027, while days on the market metrics stretch out, more and more.
Locked-in sellers will continue to resist price cuts. Who wants to voluntarily book a huge loss?
And alternative housing options (renting, new homes) should continue to absorb any buildup in housing demand pressure — across 2027, and likely, 2028 too.
The U.S. Rental Vacancy Rate has trended upward towards 7% since COVID ended. The rental market can offer U.S. consumers and homeowners relief — from a record elevation in U.S. monthly home ownership costs.
In turn, new U.S. home builders (concentrated in places like Texas, Arizona, and the U.S. South) will keep using smaller floor plans, lower new home prices, and mortgage rate incentives — to move a rising inventory of New Home Builds there, in 2027.
A regional bifurcation to new home builds then implies overall Northern Home Prices are more likely to stay stagnant and high — for longer. The Northeast region, in particular, shows the highest price resilience; and a persistent home supply deficit.
Overall Southern Home Prices likely lead the way down, towards home price normalization.
As completed New U.S. Home Builds continue entering the U.S. market in 2027, alongside expanding Rental alternatives, overall U.S. Home Price Growth faces an effective ceiling.
There has become — effectively in late 2026 — a dual segment to both U.S. home supply and demand.
Driven by the circumstances delivered by the COVID era.
This is notable and unique.
U.S. Existing and New home segmentation, tied to regional bifurcation, should underscore any economist’s prognosis — on 2027 and 2028 too.
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The Great U.S. Home Mortgage Lock-In
This is an excerpt from our most recent Economic Outlook report. To access the full PDF, please click here.
This scenario is unique: A large chunk of the existing U.S. housing supply is locked into super low fixed COVID-era mortgage rate finance terms.
The average 30-year fixed U.S. mortgage rate sat at 3.11% in 2020 and 2.96% in 2021.
According to Redfin analysis undertaken on Sept. 25th, 2025 (a year ago):
The mortgage data Redfin used was drawn from the FHFA’s National Mortgage Database.
Unprecedented FOMC policy manipulation of underlying U.S. mortgage finance, explains why U.S. housing inventory has remained tight, to late 2026. And likely, in 2027 and 2028.
What was the National Average for a new 30-yr fixed mortgage on Sept. 17th? 7.05%.
A sticky or higher than 5.0% yield on the benchmark 10-year U.S. Treasury note signals a significant upward surge for U.S. 30-year fixed mortgage rates, likely pushing them into a range of 7.5% to 8.0%.
That leads me to these conclusions:
Few locked-in U.S. homeowners, not under moving or job market stress, will willingly swap 2.5x, from a ~3.0% 30-year fixed rate mortgage, into a 7.5% or even 8.0% loan.
Therefore, existing overall U.S. home sales are likely to remain muted in 2027, while days on the market metrics stretch out, more and more.
Locked-in sellers will continue to resist price cuts. Who wants to voluntarily book a huge loss?
And alternative housing options (renting, new homes) should continue to absorb any buildup in housing demand pressure — across 2027, and likely, 2028 too.
The U.S. Rental Vacancy Rate has trended upward towards 7% since COVID ended. The rental market can offer U.S. consumers and homeowners relief — from a record elevation in U.S. monthly home ownership costs.
In turn, new U.S. home builders (concentrated in places like Texas, Arizona, and the U.S. South) will keep using smaller floor plans, lower new home prices, and mortgage rate incentives — to move a rising inventory of New Home Builds there, in 2027.
A regional bifurcation to new home builds then implies overall Northern Home Prices are more likely to stay stagnant and high — for longer. The Northeast region, in particular, shows the highest price resilience; and a persistent home supply deficit.
Overall Southern Home Prices likely lead the way down, towards home price normalization.
As completed New U.S. Home Builds continue entering the U.S. market in 2027, alongside expanding Rental alternatives, overall U.S. Home Price Growth faces an effective ceiling.
There has become — effectively in late 2026 — a dual segment to both U.S. home supply and demand.
Driven by the circumstances delivered by the COVID era.
This is notable and unique.
U.S. Existing and New home segmentation, tied to regional bifurcation, should underscore any economist’s prognosis — on 2027 and 2028 too.