Throughout the course of the Pandemic Housing Boom, homebuyers were jumping at the opportunity to secure mortgages at ultra-low rates of 2% to 3%, creating a whirlwind of housing market transactions. But now, a growing frustration is seeping into the industry as those once tantalizingly low rates have given way to a stark reality of higher rates and fewer transactions. The cause of this housing market shift? Enter the "lock-In effect," a term that has real estate professionals sounding the alarm and grappling with the consequences of the abrupt change.
The idea of the "lock-in effect" is that homeowners are reluctant to sell their properties—and buy something new—due to the financial shock that would come with losing their historically low mortgage rates for something with a 6% or 7% handle.
