When the interest rate hike cycle began, Powell warned that raising interest rates to combat inflation would increase mortgage costs, putting pressure on young homebuyers. The market initially expected economic growth to gradually absorb this burden, but in reality, the housing affordability imbalance in the US has not eased with economic expansion; instead, it has continued to worsen. Goldman Sachs warns that mortgage lock-in effects are suppressing housing supply, and high interest rates are suppressing demand, meaning the adjustment pressure on the US housing market will continue, with first-time homebuyers being relatively more significantly impacted. Affordability pressures in the US housing market continue to accumulate, with mortgage rates firmly above 7%, significantly increasing the cost of homeownership. Goldman Sachs economist Ronnie Walker warned in a client report that the housing affordability imbalance will become even more pronounced in 2027, with young homebuyers facing particularly significant challenges. Since February of this year, US mortgage rates have risen by nearly 150 basis points, continuously compressing homebuying budgets.

Mortgage lock-in effect: Existing low-interest loans freeze housing supply

During the low-interest-rate period of 2020-2021, a large number of US residents refinanced their mortgages, creating the well-known mortgage lock-in effect. Currently, about 60% of homeowners hold mortgages with interest rates lower than the current market level, with 65% of homeowners having rates at least 2 percentage points lower than the current market rate. Selling an existing home to buy a new one means giving up the original low-cost loan and taking on a new, more expensive mortgage, significantly increasing the economic cost of switching homes. This has led to a weaker willingness among homeowners to list their properties, resulting in a persistently low supply of homes available on the market. Walker points out: "The large number of borrowers locking in low interest rates in 2020 and 2021, coupled with the current high mortgage rates, has created a huge financial cost for those switching homes; homebuyers who want to upgrade their residences must pay off their existing low-interest loans and reapply for high-interest mortgages." Goldman Sachs estimates that US existing home sales in 2027 will only reach 3.9 million units, slightly lower than the 2026 forecast and a 26% decline from the pre-pandemic level of 2019.

First-tier markets cool down: demand-driven sectors face pressure, while high-end properties show greater resilience.

Firsthand feedback from Nashville real estate agent Jack Kennedy confirms the cooling trend: both open house visits and mortgage applications have declined, indicating a significant decrease in local real estate transaction activity. A property listed at nearly $100,000 below the area average saw very few visitors, whereas similar properties attracted significantly more attention two months prior. Kennedy stated that he believes Goldman Sachs' prediction is highly likely to come true. With home prices remaining at historically high levels, rising financing costs are weakening purchasing power, and coupled with uncertainty about the employment outlook, buyers are more cautious about long-term, large-scale debt. The market is showing structural differentiation: affordable housing for ordinary families is under more significant pressure, while high-end properties are performing relatively steadily. Kennedy also cautioned that the cooling housing market could have cross-sectoral implications, and the capital market may face new challenges early next year after the holidays.

The market is likely to consolidate moderately, with limited risk of a systemic collapse.

Jonathan Carcone, head of a real estate agency, believes that the stalemate between buyers and sellers may continue until 2027, with overall housing prices likely to remain flat or experience a slight correction, and a deep collapse is unlikely. As transactions weaken, the room for negotiation will further widen, and homeowners with a strong desire to sell will need to adjust their asking prices to align with market expectations. Carcone analyzes that older homes with low equity and high prices are more likely to see price reductions, while new homes with prices out of line with the market will have longer sales cycles. Families with sufficient home equity are more resilient to market adjustments, and homeowners with stable cash flow are more inclined to renovate their existing homes rather than replace them or forgo low-interest loans. For owner-occupier buyers with stable cash flow who plan to hold their homes for at least three years, renovating their homes now is feasible; for families with low-interest mortgages, renovating is more cost-effective than replacing.

Homebuying intentions have declined, highlighting structural contradictions in the housing market.

Supply constraints are not the only influencing factor; demand confidence is also weakening. Walker's analysis suggests that while demographic shifts and income recovery could have supported housing demand, recent surveys of homebuying intentions have shown a significant decline. Slower immigration inflows will also slow the pace of new household formation, suppressing long-term housing demand. Pew Research Center survey data shows that 90% of respondents under 40 believe that buying a home in the US is more difficult now than it was for their parents. From 2019 to 2024, the median home price, adjusted for inflation, is projected to rise by 30%, while the income of households under 40, adjusted for inflation, will only increase by 9%, widening the gap between home prices and income. Kennedy noted that rising housing costs are making it increasingly difficult for young people to buy their first home, with many struggling to realize their homeownership plans even with good savings and credit records.

In summary, amidst the interest rate stalemate, the risks of both sluggish liquidity and structural divergence coexist.

The high-interest-rate environment creates a unique cyclical constraint: existing low-interest mortgages constrain housing supply, while new high interest rates suppress housing demand, leading to a continued contraction in transaction volume and difficulty in quickly clearing housing prices, thus continuously squeezing purchasing power. The market impact exhibits structural differences, with first-time homebuyers bearing relatively greater pressure. According to multiple institutions, the mortgage lock-in effect prolongs the impact cycle of interest rate policies, with the pressure primarily reflected in shrinking transactions rather than a rapid price collapse. If high interest rates persist for an extended period, the structural differentiation in the US housing market will further deepen, dragging down domestic demand performance, representing a tail risk that requires continuous monitoring of overseas macroeconomic trends.