The mechanic
A homeowner holding a mortgage well below current market rates faces a substantial payment increase to move, even into an identical house. That penalty suppresses listings, which suppresses sales, which keeps inventory tight regardless of demand conditions.
Why it broke the usual playbook
Normally weaker demand produces rising inventory and falling prices. Lock-in interrupted that transmission: transaction volume fell sharply while inventory stayed constrained, so prices held far better than a demand-only analysis predicted.
How it unwinds
Slowly. Through rate declines that narrow the gap, through life events that force moves regardless of rate, and through the gradual turnover of the mortgage stock. It is a multi-year adjustment, not a switch. See interest rates and housing.
Frequently asked questions
Does lock-in affect rentals?
Yes indirectly. Fewer listings push some would-be buyers into renting, supporting rental demand.
Will inventory normalize?
It has been improving gradually. The pace depends primarily on rate movement and household formation.