The U.S. housing market’s reliance on long-term fixed-rate mortgages is creating a “handcuffed” dynamic that suppresses turnover and depresses transaction volumes, according to a new analysis by Cotality economists. The report highlights how structural differences between the U.S. and other major housing markets are shaping market behavior and future prospects.
At the core of the report is the contrast between the U.S. 30-year fixed mortgage and shorter-term, adjustable-rate frameworks used in countries such as Canada, the United Kingdom, Australia, and New Zealand. In those international markets, mortgage payments reset more frequently, forcing homeowners to adjust to changing interest costs and often motivating moves. By contrast, U.S. borrowers holding mortgages with rates below 4% can remain insulated from current double-digit increases in borrowing costs, anchoring them in place and limiting listings.
Cotality Principal Economist Thom Malone characterizes this phenomenon as creating “stability but heavy anchors,” slowing market activity by reducing the incentive for homeowners to sell when rates are significantly higher than their original loans. With sales volumes currently around 75% of 2020 levels and inventory remaining tight, the report asserts that property markets are becoming volume-driven rather than price-driven.
Beyond mortgage structure, rising homeownership costs compound market inertia. Home prices have outpaced income growth over the past five years, climbing roughly 55% compared with a 25% rise in nominal income. Mortgage rates have more than doubled from pandemic lows, while property taxes and insurance premiums have grown, especially in high-risk regions. These factors collectively elevate ownership burdens and further discourage moves.
Cotality’s analysis points to notable systemic pressures: the Federal Housing Finance Agency (FHFA) estimates that approximately 1.7 million potential home sales between 2022 and 2024 did not occur because homeowners opted to retain low-rate mortgages rather than transact. The median national home price near $400,000 continues to raise the barrier for entry for first-time buyers, even as equity cushions for existing owners remain high.
Policymakers and industry stakeholders are considering innovations such as extended-term mortgages of up to 50 years and portable rate products to enhance mobility, though such approaches carry additional long-term costs and risks.
Looking ahead, the report forecasts restricted housing mobility persisting through at least 2027, with gradual increases in listings likely tied more to life events than rate declines. Regional tax and insurance trends will shape localized market trajectories, and the pace of adjustment will influence planning across lending, construction and government sectors.
