‘A major shift’ has just occurred in the U.S. housing market, according to a real estate CEO. This change might determine whether people can afford to purchase a home.

The Shifting Landscape of the U.S. Housing Market

During the pandemic, homebuyers benefited from historically low mortgage rates below 3%, sparking a surge in purchases, particularly among younger buyers. However, this period of opportunity was short-lived. In the years that followed, rising home prices, increasing mortgage rates, inflation, and stagnant wages made homeownership much less attainable, causing the American Dream to slip out of reach for many.

As a result, a significant number of homeowners locked in these ultra-low rates, especially compared to today’s rates, which hover in the 6% range. This created what’s known as the lock-in effect: homeowners were reluctant to sell their homes and give up their favorable rates, knowing they’d face much higher payments if they bought again.

Recently, however, this dynamic has begun to shift. Nick Gerli, CEO of Reventure, pointed out that by the end of 2025, more homeowners now have mortgages with rates above 6% than those who are locked into sub-3% loans. This marks the end of an era of exceptionally cheap home financing.

“A major change just occurred in the U.S. housing market,” Gerli shared in a January 3 social media post, noting that the once-dreaded mortgage rate lock-in effect is starting to weaken.

During the height of the lock-in effect, millions of homeowners with very low rates were financially discouraged from moving or upgrading to larger homes. This led to a shortage of homes for sale, fierce competition among younger buyers for entry-level properties, and a dramatic rise in the average age of first-time buyers. According to the National Association of Realtors, the typical first-time homebuyer was 40 years old in 2025, and the share of first-time buyers dropped to a record low of 21%.

“The historically low share of first-time buyers highlights the real impact of a market with too few affordable homes,” said Jessica Lautz, deputy chief economist at NAR. “Since 2007, the proportion of first-time buyers has been cut in half.”

But with fewer homeowners holding onto those ultra-low rates, Gerli believes the market could see more movement. “With more owners now paying rates closer to current market levels, there’s greater motivation to sell—which is actually positive news,” he explained, referencing data from Fannie Mae’s mortgage database for Q3 2025.

A New Era for Mortgage Rates

Gerli’s research shows that the share of mortgages with rates at or above 6% has jumped from about 7% in 2022 to roughly 20% by late 2025. This group now outnumbers those with sub-3% loans, which peaked at nearly a quarter of all mortgages in 2021 but have steadily declined as new buyers take on higher-rate loans and older owners move or refinance.

“This shift is happening because, even with sluggish home sales and refinancing, around 5–6 million Americans take out new mortgages each year—now at rates above 6%,” Gerli noted.

Mortgage rates have eased from their peak of 8% in October 2023, with the average 30-year fixed rate now in the low 6% range—still more than double the rates seen during the pandemic boom.

It’s important to note that Gerli isn’t predicting a return to sub-3% rates. Most experts agree that such low borrowing costs are unlikely to reappear unless there’s another extraordinary global event. Max Slyusarchuk, CEO of A&D Mortgage, told Fortune that the circumstances behind those rates were truly once-in-a-lifetime, and significant wage growth—like that seen after World War II—would take decades to repeat.

Still, Gerli argues that even a sustained drop below 6% could encourage more homeowners to list their properties, helping to thaw the frozen inventory.

“Expect to see more homes hitting the market in the coming years as a result,” he said.

Additionally, over 30 million homeowners are mortgage-free, and the share of outright owners rose to 40% in 2023, up from 33% in 2010. While this trend reflects a move toward debt-free homeownership, it also means buyers are competing against older, equity-rich households—making it even tougher for newcomers.

The Growing Affordability Challenge for 2026 Buyers

This imbalance is a key reason why over 75% of homes on the market are now out of reach for the average household, according to a recent Bankrate analysis. Most Americans are about $30,000 short of what’s needed to buy a median-priced home. In many markets, a six-figure income is now required to comfortably afford a typical property, yet the average salary is only about $64,000.

“When so few homes are affordable, homeownership feels less like a rite of passage and more like a privilege,” said Bankrate analyst Alex Gailey. “It’s no wonder that one in six would-be buyers have given up in the past five years.” Another Bankrate survey from September 2025 found that one in six aspiring homeowners had abandoned their search entirely.

With mortgage rates and home prices both much higher than before the pandemic, the definition of a starter home has changed dramatically. Today’s buyers can afford 30% to 40% less house than they could in 2021, forcing many to adjust their expectations, relocate to more affordable areas, or postpone buying altogether.

In fact, in expensive coastal cities like New York, Los Angeles, Miami, San Francisco, San Diego, and San Jose, even a 0% mortgage rate wouldn’t make a median-priced home affordable for a household earning the local median income, according to a recent Zillow report. Zillow analyst Anushna Prakash called this scenario “unrealistic” given the drastic price drops that would be required.

“Lower rates help, but they’re only part of a much larger puzzle that includes limited inventory, stagnant wages, and rising costs for insurance and taxes,” said James Schenck, CEO of PenFed Credit Union. “Affordability is about more than just interest rates—it’s about the entire system of access and equity.”

Looking ahead, economic forecasts suggest only modest improvements in mortgage rates and affordability. While rates may dip slightly in 2026, experts don’t expect a dramatic change. According to an analysis based on Realtor.com data, restoring widespread affordability would require one of three unlikely events: mortgage rates dropping to the mid-2% range, household incomes jumping by more than 50%, or home prices falling by about a third.

“We expect the housing market to remain stuck unless we see rapid income growth, a significant drop in mortgage rates, or a major decline in home prices—all of which are unlikely,” said Sean Roberts, CEO of Villa.

This article was originally published on Fortune.com.