Mortgage Rate Lock-In Effect Starting to Slip

According to a new Zillow report, 21% of surveyed homeowners are considering selling their homes, despite higher home values and rates, a number which is up from 15% from one year ago. 

Monthly mortgage payments, which align with home prices and interest rates, are now down $143 from peaks seen in October, rendering them “affordable” again. 

In addition, while inventory levels are recovering, they are still far below pre-pandemic levels and competition for available listings is still stiff. 

“Buyers found significant savings as rates fell. But mortgage rates are fickle things, as we’ve seen in recent weeks, and they’ll play a massive role in determining appreciation and affordability—especially for first-time buyers—going forward in 2024,” said Skylar Olsen, Zillow’s Chief Economist. “Fortunately, rate lock appears to be wearing off for some homeowners, who show encouraging signs that they’re ready to come back to the market.” 

Another metric discovered by Zillow’s monthly housing survey found that 21% of homeowners are considering selling their home within the next three years for a litany of factors—including a weakening of the lock-in effect—up from 15% a year ago. 

The survey, fielded in the fourth quarter of 2023, also found that the share of homeowners considering selling was almost the same whether they had a mortgage rate above or below 5%. 

That’s a big change from six months ago, when homeowners with rates above 5% were nearly twice as likely to consider selling. 

According to Zillow, the survey data shows that more owners with low rates are warming up to the idea of selling, while those with higher rates probably purchased their house fairly recently. Current mortgage rates look to be less of a determining factor when considering a sale. 

Further, Zillow found that monthly payments on a typical home have fallen to $1,790, down from $143 in October. This drop has brought back some affordability to homebuyers, even by a weak definition. For the first time since April, a new mortgage at 20% down now takes less than 33% of the median household income. But that’s a national average. Prices are so high that the median household can’t even qualify for a mortgage in many expensive metros. A 20% down payment is a high bar, too, especially for first-time buyers. Half of all buyers put less money down, and half of first-time buyers use either a gift or a loan from family or friends to fund their down payment. 

Inventory is also improving; it made its first annual gains since April and are now 36% below pre-pandemic averages, an improvement over the 46% deficit seen in May. 

The flow of new listings to the market is slightly better than a year before, and although levels are 14.5% below pre-pandemic norms, they seem to be trending in the right direction. Time will tell if that progress continues in 2024. 

Click here to see the report in its entirety, including breakdown for top metropolitan cities. 

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Kyle G. Horst

Kyle G. Horst

Kyle G. Horst is a reporter for MortgagePoint. A graduate of the University of Texas at Tyler, he has worked for a number of daily, weekly, and monthly publications in South Dakota and Texas. With more than 10 years of experience in community journalism, he has won a number of state, national, and international awards for his writing and photography including best newspaper design by the Associated Press Managing Editors Group and the international iPhone photographer of the year by the iPhone Photography Awards. He most recently worked as editor of Community Impact Newspaper covering a number of Dallas-Ft. Worth communities on a hyperlocal level. Contact Kyle G. at
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