Beyond Rate Lock-In: Seller Uncertainty Creates a Second, Overlooked Inventory Freeze

Written by:

Rudi Davis

Date:

09 Dec 2025

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Seller psychology and demographic trends are creating a housing shortage in Rhode Island that extends far beyond the 20% of homeowners holding onto low mortgage rates, according to local real estate advisor Walt Buteau of Engel & Völkers Oceanside.

Rhode Island’s inventory crisis is often blamed on homeowners with sub-4% mortgages who are unwilling to sell and take on loans at 6% or 7%. But Buteau says this rate lock-in is only part of the story. “I have multiple sellers who say, ‘I don’t want to list my house until I know I have a place to go,’” Buteau explains. These homeowners are hesitant to list their properties without a clear path to their next home, fearing they’ll be forced to move without suitable replacement housing or risk a contract expiring.

This creates a self-reinforcing cycle: would-be sellers wait for new listings before putting their own homes on the market, but their hesitation prevents new inventory from appearing. As a result, Rhode Island’s shortage is not just a consequence of low rates but also a product of seller uncertainty and interconnected decisions across the market.

A Multi-Layered Inventory Shortage

Buteau identifies three main groups contributing to Rhode Island’s inventory shortage, each with distinct motivations and barriers.

First are the homeowners with mortgage rates under 4%. Buteau estimates they make up about 20% of the market. These owners are unlikely to move unless compelled by a major life event, such as a job relocation or the need for more space. “That 20% is pretty locked in, and maybe for a while,” Buteau says.

The second group are baby boomers aged 60 and above who have significant equity or own their homes outright. Their decision to sell depends entirely on whether they can find a suitable replacement property. “Whether they sell or not depends on whether they can find the right house, so they’re kind of locked in,” Buteau explains.

The third group consists of homeowners with mortgages in the 5% to 7% range who bought within the last three or four years. Many have built up some equity, but uncertainty about whether it’s enough to move up keeps them from listing. This hesitation is more psychological than financial, Buteau notes, but it’s no less real in its effect on inventory.

Together, these groups have driven Rhode Island’s active listings to some of the lowest levels in recent years. The state currently has about 2,200 properties on the market at any given time, with 1,300 of those being single-family homes. “Inventory is down about 10 to 15% from last year, month to month, October to October,” Buteau reports. The market is still waiting for a meaningful increase in available homes.

The Domino Effect: What Could Break the Logjam

Buteau believes that the inventory shortage will persist until one or more of these groups changes course. “If any of those blocks, it’ll be a domino effect,” he says. “Once one of those blocks, or both, start to erode a little bit and decide, ‘I got to sell, I want to move, I want a bigger house, I want a different house,’ then I think we’ll see the inventory come back on.”

He sees two potential triggers for this shift: a significant drop in mortgage rates or a change in seller attitudes. Buteau spends much of his time working to influence the latter, focusing on educating homeowners about current conditions and the risks of waiting too long to sell. “Now is the time to get top dollar for your house, because the prices are definitely leveled in many communities and are starting to go down,” Buteau advises. He warns that sellers clinging to peak pandemic-era price expectations may miss their best opportunity to maximize value.

Many owners remain emotionally attached to outdated valuations, making it difficult to convince them that the market has changed. Buteau emphasizes that persistent education and relationship-building are required to help sellers adjust to new realities—a level of effort he says not all agents are willing to provide.

Ripple Effects Across the Market

The shortage of listings affects every segment of Rhode Island’s housing market. First-time buyers face intense competition for the limited supply of homes under $500,000, often engaging in bidding wars that drive prices higher. Investors searching for renovation opportunities must outbid multiple rivals, which raises acquisition costs and reduces potential profits. Even luxury buyers, who might expect more choice, are constrained by the lack of move-up sellers willing to list their homes.

Buteau’s analysis highlights that Rhode Island’s inventory crisis cannot be solved by addressing a single factor. Lowering mortgage rates may help unlock some supply, but it will have a limited impact if baby boomers cannot find appropriate downsizing options or if recent buyers remain uncertain about their financial position. Similarly, new construction will only ease the shortage if it meets the specific needs of these different seller groups.

Industry Response: Proactive Outreach and Seller Education

Buteau’s strategy for addressing the shortage centers on aggressive, daily prospecting and clear communication with homeowners. “I work every day trying to get people to sell,” he says, stressing the importance of letting potential sellers know about their options and the realities of current market conditions. He suggests that more real estate professionals should adopt this approach, actively seeking out conversations with homeowners who may not realize their window to sell at a premium is closing.

He also emphasizes the value of discipline and structure in prospecting, including block scheduling and maintaining a dedicated office for outreach activities. This level of focus, Buteau suggests, is not yet standard across the industry, but could be crucial as agents look for ways to generate listings in a tight market.

Looking Ahead: How Long Will the Shortage Last?

Absent a major drop in interest rates or a broad change in seller psychology, Buteau predicts that Rhode Island’s inventory constraints will persist into 2025 and possibly beyond. The challenge for real estate professionals is whether they will adapt their practices to address the complex, layered causes of the shortage or simply wait for external factors to resolve it.

The current environment demands more than just waiting for rates to fall. It requires agents to understand the unique motivations and barriers facing each segment of potential sellers and to engage them directly with accurate, timely information. As Rhode Island’s market continues to struggle with limited supply, the ability of real estate professionals to unlock hidden inventory through education and outreach may determine how—and when—the cycle finally breaks.