Housing News

Homeowners Have $11.6 Trillion in Equity Tied to Low Rates. What It Means for Today’s Homebuyers

American homeowners have accumulated trillions of dollars in home equity, and many are holding on to something equally valuable: historically low mortgage rates.

Their reluctance to give up those rates is helping shape today’s housing market. For prospective homebuyers, understanding why homeowners are staying put could help them spot opportunities to negotiate a better deal.

Of the $13.2 trillion in accessible home equity held by homeowners with mortgages, approximately $11.6 trillion is associated with loans carrying interest rates below prevailing market rates, according to housing market data cited by Ryan Schoen, principal analyst at New American Funding (NAF), in his latest Weekly NAF Insights report.

That represents 88.4% of accessible equity as of the second quarter of 2026.

“In plain English, millions of households are sitting on ultra-low rates from the pandemic era and earlier, making them reluctant to sell or refinance into today’s higher-rate world,” wrote Schoen.

While the so-called mortgage rate lock-in effect has limited the number of homes coming onto the market, homebuyers may still find opportunities among motivated sellers, newly constructed homes, and properties that have been sitting on the market.

Why homeowners are holding on to their low rates

During the pandemic, millions of Americans purchased homes or refinanced at historically low interest rates. Many secured mortgages around 3%, allowing them to keep monthly payments relatively affordable while building equity as home values rose.

Today, moving presents a different financial calculation.

Consider a homeowner with a $300,000 mortgage at 3%. The monthly principal and interest payment on a 30-year loan would be approximately $1,265.

At 7%, that same mortgage would cost about $1,996 a month, an increase of more than $730. And that’s assuming the homeowner doesn’t need to borrow more to purchase another property.

The incentive to stay becomes especially strong when the difference between existing and current mortgage rates is particularly large.

According to Schoen’s analysis, 82.9% of locked-in accessible equity, or approximately $9.6 trillion, falls into the “extreme” category. That means the existing mortgage rate is more than 1.5 percentage points below the prevailing market rate used in the analysis.

“The ‘extreme’ cohort is the real inventory holdout,” wrote Schoen.

Still, homeowners continue to sell for many reasons, including career, retirement, and changing family needs. And when sellers have a reason to move, homebuyers may have an opportunity to negotiate.

Where homebuyers may find opportunities

The mortgage rate lock-in effect varies considerably across the country, which makes local market conditions especially important.

South Dakota leads the nation, with 98% of accessible home equity associated with below-market mortgage rates. Washington follows at 93.3%, Wisconsin at 92.4% and Colorado at 92%.

At the other end of the spectrum, Connecticut has a locked-in share of 74.6%, followed by Massachusetts at 76.7% and Rhode Island at 77.7%.

These percentages measure the share of accessible equity tied to below-market mortgages, rather than the number of homeowners refusing to sell.

In expensive California markets, the dollar amounts are particularly striking.

Among the nation’s 100 most populous metropolitan areas, San Jose, Calif. leads with approximately $899,406 in locked-in accessible equity per property, followed by San Francisco at roughly $597,000, Los Angeles at $553,000, and San Diego at $514,000.

For homebuyers, these differences reinforce the importance of looking closely at individual markets.

A property that has been listed for several months or undergone multiple price reductions may present an opportunity to negotiate, even in an area where housing stock remains limited.

Homebuyers can ask their real estate agents to review recent comparable sales, investigate a property’s listing history, and determine whether a seller may be willing to accept a lower offer.

They may also be able to negotiate closing cost assistance or a seller-paid mortgage rate buydown, potentially reducing their upfront expenses or monthly payments.

New construction offers another possibility. Builders may provide financing incentives, upgrades, or closing cost assistance, particularly on completed homes they are eager to sell.

What could bring more homes onto the market?

A sustained decline in mortgage rates could encourage more homeowners to consider selling by narrowing the gap between their existing rates and current borrowing costs.

And while homeowners with rates around 3% may remain reluctant to move, other factors will continue to bring properties onto the market.

“Markets eventually adapt,” wrote Schoen in his report.

Meanwhile, homeowners who want to access their equity without moving may consider a Home Equity Line of Credit (HELOC), which allows qualified borrowers to tap into their equity while keeping their existing first mortgage.

For prospective homebuyers, the takeaway is encouraging: Opportunities exist even when housing stock is limited.

By paying attention to local conditions, exploring new construction, and identifying sellers who may be willing to negotiate, homebuyers can find ways to make today’s market work in their favor.