Published by REALTOR.com | January 10, 2025
This is keeping many would-be sellers “locked in“ and hindering total inventory recovery.
New York City school teacher Joann Mariani had no idea how extraordinary her timing was when she was shopping for a home in summer 2021.
In the thick of the COVID-19 pandemic—when lockdowns, face masks, and vaccines were common—she was looking for a new place to live in the upper Hudson Valley. At the time, mortgage rates had dipped to an astonishingly low 2% to 3%.
“It was a perfect-storm hot market,” says Mariani.
Competition was fierce due to pandemic-fueled migration shifts from urban centers, but savvy buyers also wanted to take advantage of these low rates.
When Mariani found her dream house—a three-bedroom, 1,046-square-foot home on Larchmont Road in Carmel, NY—she did not hesitate.
“I thought, ‘I better lock down this rate,’” she says.
To do so quickly, she bid $10,000 over the $265,000 list price. She also skipped applying for an FHA loan, instead cleaning out an old Roth IRA, withdrawing $75,000 for the down payment and closing costs and an additional $26,000 in taxes.
It was one of the best financial decisions she ever made, she says.
“Three months later, rates skyrocketed,” she adds. “A friend of mine bought a house near me the following year. Hers is only $4,000 more, but she’s paying $500 more a month.”
Since then, her home has seen a 36% appreciation, worth an estimated $100,000 more today than at purchase.
With her $8,354 annual property tax, home insurance, and mortgage, Mariani pays $1,851 a month, saving $450 per month from the rent she was paying for a three-bedroom home in the Bronx.
Extraordinary conditions
Mariani isn’t alone in her mortgage savvy. She and other homeowners who locked in low rates are holding on for dear life. This has created a lock-in effect for homeowners who are reluctant to trade in their low-rate mortgages for today’s higher ones.
In the third quarter of 2024, 21.3% of outstanding mortgages had an interest rate below 3%, according to the latest report from Realtor.com®.
The Freddie Mac fixed rate on a 30-year loan dipped below 3% in July 2020, and generally stayed below that threshold through September 2021, just when Mariani was closing on her dream home.
Highlighting how extraordinary these conditions were, this was the only period in the data’s history (back to 1971) when rates dropped below 3%.
