How Rate-Locked Homeowners Are Creating a Lasting Inventory Shortage

Written by:

Rudi Davis

Date:

27 Jan 2026

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Conventional wisdom in real estate says buyers should wait for lower interest rates before making a purchase. But in the Hudson Valley and similar regional markets, this approach is leaving would-be buyers further behind each year. The real challenge is not just affordability, but a persistent lack of homes for sale caused by homeowners who refuse to give up their low mortgage rates.

Susan Onderdonk, a real estate salesperson with Howard Hanna Rand Realty, sees this “golden handcuffs” effect reshaping the market. Homeowners with 2–4% mortgage rates are staying put, creating a two-tier market where the few sellers willing to list hold all the pricing power.

“We have had a drop in inventory because you have the higher interest rates. So you have what’s called the golden handcuffs, where people don’t want to move because they have a great interest rate on their home,” Onderdonk says. “The prices are higher because the inventory is lower.”

Why Waiting for Rates Is a Losing Strategy

Many buyers believe that waiting for interest rates to drop will make homes more affordable. Onderdonk’s experience suggests the opposite: each year buyers wait, prices increase faster than any savings from lower rates.

“I have people that I’ve worked with for years because they’re waiting and waiting, which is not smart, because every year that you’ve been waiting, the market has been going up,” Onderdonk says.

This dynamic creates a paradox. Buyers delaying their purchases to secure better rates are finding that home prices are rising faster than their ability to save or benefit from a future rate cut. When desirable homes do hit the market, they attract multiple offers and often sell above asking price, further eroding any advantage from waiting.

Onderdonk observes that updated homes in sought-after locations “go very quickly if they’re priced well,” and properties with lake views often spark bidding wars. Even if rates drop, these competitive pressures are unlikely to ease, leaving buyers who waited facing even stiffer competition.

Why Inventory Won’t Rebound Quickly

The inventory shortfall is not a temporary condition. Homeowners with ultra-low mortgage rates have little financial incentive to sell, even if their current homes no longer fit their needs. Moving to a similar property at today’s rates would mean much higher monthly payments, even if the sale price is about the same.

This lock-in effect is powerful in areas like Greenwood Lake, where natural beauty and proximity to Manhattan keep demand steady. “We’re always a desirable market,” Onderdonk says. “There hasn’t been any downtime for me. I always have people interested in buying in this area.”

Because of this steady demand and low supply, even a modest rate drop is unlikely to trigger a surge of new listings. Most homeowners will only move for significant life events—such as divorce, death, or job relocation—rather than for market conditions alone.

Limited Relief from Adjacent Markets

The shortage in primary markets is also pushing effects into neighboring areas. In West Milford, New Jersey, new restrictions on short-term rentals are forcing some Airbnb hosts to sell or rent their properties long-term. “I’m seeing a lot of those homes come on the market,” Onderdonk says.

But this extra inventory is not enough to address the core shortage in markets like Greenwood Lake. The properties from adjacent markets often don’t align with what buyers want in the primary market, offering only limited relief from the broader supply crunch.

How Buyers Can Respond

Onderdonk advises buyers to reconsider the wisdom of waiting and to explore other strategies. She recommends staying in close contact with lenders and being open to homes that may need some renovation.

“Maybe consider buying something a little bit less where you might have to do some renovation to it in the future,” she suggests. “Maybe get a mortgage that can accommodate a renovation to your kitchen or your bathroom or whatever you need.”

This approach allows buyers to enter the market before prices climb further, rather than holding out for the perfect home or a better rate. Renovation loans can help buyers improve a property over time, making it more affordable to buy now rather than waiting for conditions that may never materialize.

Rethinking Market Analysis

For investors and market analysts, the golden handcuffs phenomenon exposes a significant gap in traditional housing metrics. Standard indicators—like days on market or inventory counts—fail to capture the behavioral impact of owners locked into low rates.

Onderdonk’s perspective points to a lasting structural problem in markets with strong demand and limited new construction. Even as rates fluctuate, these markets will remain tight unless there is a significant change in homeowner behavior or a wave of new building.

Looking Ahead: When Will Buyers Change Course?

The current pattern suggests that buyers waiting for lower rates are likely to pay more in the long run. As long as homeowners remain locked in by low rates and life events remain the main reason for selling, inventory will stay scarce, and prices will keep rising.

Whether this reality will force more buyers to act sooner—or prompt a broader shift in how people think about timing their purchase—remains to be seen. But as Onderdonk’s experience shows, waiting for the “perfect” market is proving to be an expensive strategy. Buyers, investors, and analysts alike must adjust their expectations to the new normal of the rate-locked housing market.