If you’ve been watching the housing market and wondering why there’s nothing good available — you’re not imagining it. Inventory is historically low. And the reason has nothing to do with a housing crash or a bubble. It’s actually much simpler than that.
Nobody wants to give up their mortgage.
The Lock-In Effect: Why People Aren’t Moving
During the pandemic, mortgage rates dropped to historic lows. Millions of Americans locked in 30-year fixed rates at 2.5%, 3%, 3.5%. At the time it felt like a normal refinance. In hindsight, it was one of the best financial moves anyone could have made.
Here’s the math that explains why those people aren’t going anywhere.
$400,000 home at 3% interest: Monthly payment: ~$1,686
Same $400,000 home at 7% interest: Monthly payment: ~$2,661
That’s nearly $1,000 more per month. For the same house. Forever.
So when someone with a 3% mortgage thinks about selling and buying something else — even a lateral move, same price range — they’re looking at adding $1,000/month to their housing cost. Most people don’t do that voluntarily.
The result: people are staying put. The average homeowner used to move every 5–7 years. Now it’s closer to 8.6 years and rising.
Fewer people moving = fewer homes for sale = inventory stays low = prices don’t drop even when rates are high.
This is why 2024–2026 feels nothing like 2008. In 2008, the problem was too many houses and not enough qualified buyers. Today, the problem is not enough houses — and the people who own them have every financial incentive to stay.
“Just Wait for the Crash” Is Probably the Wrong Strategy
I hear this constantly. People sitting on the sidelines waiting for prices to drop 20–30% before they buy.
It might happen. But here’s why I’m skeptical.
For prices to drop significantly, supply needs to increase dramatically. And supply only increases when people sell. And people only sell when they’re willing to give up their 3% mortgage — which, as we just covered, most aren’t.
There’s also the structural supply shortage that predates the pandemic. The U.S. hasn’t built enough housing to meet demand for over a decade. That deficit doesn’t resolve quickly.
Could there be a correction? Sure. Markets don’t go up forever. But waiting for a 2008-style crash in a market with fundamentally different supply dynamics might mean waiting a very long time — while paying rent, missing appreciation, and watching the window close on assumable loans.
Speaking of which.
Assumable Loans: The Strategy Most Buyers Don’t Know Exists
Here’s one of the most underutilized opportunities in the current market.
Certain government-backed loans — FHA loans and VA loans specifically — are assumable. That means when you buy a home from someone who has one of these loans, you can take over their existing mortgage at their existing interest rate.
So if a seller has an FHA loan at 3.25% and you assume it, you’re now paying 3.25% — not the current market rate of 7%+.
On a $350,000 remaining loan balance, that difference is roughly $800/month. Every month. For the life of the loan.
How it works:
- The seller must have an FHA or VA loan (conventional loans are generally not assumable)
- You apply to assume the loan through the seller’s lender
- The lender verifies your creditworthiness
- You pay the difference between the purchase price and the remaining loan balance in cash (or through a second loan)
The catch: If the home is worth $450,000 and the remaining FHA balance is $280,000, you need $170,000 in cash or financing to cover the gap. That’s the main barrier — and it’s why assumable loans work best when the seller hasn’t built up too much equity yet, or when you have significant capital available.
Still, in a market where locking in a 3% rate could save you $800/month, it’s worth asking every seller’s agent whether the existing loan is assumable.
Bank Statement Loans: For People Whose Tax Returns Lie
I’m going to get personal here for a second.
My LLC has been registered for nine years. On paper, it looks legitimate — D&B number, solid credit history, long operating history. But like a lot of self-employed people and small business owners, my tax returns show minimal income. Because that’s how small business accounting works — you deduct everything you legally can, which reduces your taxable income, which also reduces what a conventional lender sees as your qualifying income.
It’s a frustrating paradox. The more diligently you manage your business finances, the harder it becomes to qualify for a mortgage.
Bank Statement loans exist specifically for this situation.
Instead of using tax returns to verify income, the lender looks at 12–24 months of bank statements — actual cash flowing into your accounts. If your business deposits $15,000/month consistently, a bank statement lender counts that as income. Not the $40,000/year your Schedule C might show after deductions.
Who this is for:
- Self-employed business owners
- Freelancers and independent contractors
- Anyone whose tax returns significantly understate their actual cash flow
The tradeoffs: Bank statement loans are not conventional loans. They typically carry slightly higher interest rates (0.5–1% higher than conventional) and may require larger down payments (10–20%). But for someone who genuinely earns a solid income but can’t prove it on a tax return, it’s often the only path to conventional-style financing.
If this is your situation — and it’s mine — this loan product is worth a serious conversation with a mortgage broker who specializes in non-QM (non-qualified mortgage) lending.
Asset Depletion Loans: For Retirees and the Asset-Rich
Similar principle, different application.
If you’re retired — or simply have significant assets but limited current income — some lenders will calculate a hypothetical monthly income based on your investable assets.
The formula varies by lender, but a common structure: take your total eligible assets (retirement accounts, brokerage accounts, certain other assets), divide by a set number of months (often 360 for a 30-year loan), and treat the result as monthly income.
Example:
- $800,000 in retirement assets
- Divided by 360 months
- = $2,222/month in “income” for qualifying purposes
This isn’t a mainstream loan product — you’ll need a lender who specifically offers asset depletion or asset dissipation loans. But for someone who is genuinely financially secure but can’t show W-2 income, it opens doors that conventional underwriting slams shut.
For Current Homeowners: Using Equity to Fix Your Monthly Budget
One more strategy worth understanding — not for buying, but for people who already own.
If you bought a home several years ago and have built significant equity, that equity can be used strategically. Some homeowners are using cash-out refinances or HELOCs to pay off high-interest debt — credit cards at 20%+, car payments, personal loans — and rolling everything into their mortgage at a lower rate.
Yes, your mortgage rate goes up. But if you’re paying $800/month in credit card minimums and $600/month in car payments, consolidating that debt into a mortgage payment that increases by $400/month is a net improvement in monthly cash flow.
It’s not free money — you’re extending the payoff period and increasing total interest paid over time. But for someone feeling squeezed month to month, it can create breathing room.
Run the full math before doing this. And talk to a financial advisor who isn’t trying to sell you the loan.
The Longer View
Here’s the thing I keep coming back to when I think about housing.
In 30 years, a $500,000 house today will probably be worth $850,000 — or more. That’s not a prediction, it’s a historical trend. Housing appreciates over long periods because land is finite and demand grows.
At 65, the difference between owning a paid-off home with $500/month in property taxes and renting at $2,500/month is $2,000/month in disposable income — every month, for the rest of your life.
Waiting for the perfect moment to buy has a cost. Every year of renting is a year of someone else’s mortgage getting paid instead of yours. Every year of appreciation is equity someone else is building.
None of this means buy something that doesn’t make financial sense. The numbers have to work. But “waiting for the crash” while paying rent isn’t a neutral position — it has a real price.
Not financial advice — just someone doing a lot of research and asking a lot of questions. Loan products and availability vary — talk to a licensed mortgage professional before making any decisions.