Why the Housing Crash Is Harder to See Coming

I was recently talking with a friend on her podcast, and we started discussing interest rates, inventory, and the housing market crash that some people keep predicting.
Then I said something out loud that I had heard before, but it finally hit me in a different way.
A huge percentage of homeowners are simply not motivated to move.
Look at the data below. These percentages are based on homeowners who currently have a mortgage.

The share of homeowners with ultra-low mortgage rates has been shrinking since the 2022 peak, but even in 2025, 50.6% of homeowners with a mortgage still have a rate of 4% or less.
That is a big deal.
Now let's take it one step further.
Roughly 40% of homeowners own their homes free and clear. That means they do not have a mortgage at all.
So, if 40% of homes are owned free and clear, that leaves about 60% of homeowners with a mortgage. If roughly half of those mortgage holders have a rate of 4% or less, that means about 30% of the total homeowner market has a mortgage rate under 4%.

Here is the simplified breakdown:

That means roughly 70% of homeowners are either mortgage-free or sitting on a very low mortgage rate.
That helps explain why inventory has stayed so tight.
People with a 3% or 4% mortgage are not eager to sell their house and replace that loan with a much higher rate. Their payment is too good. Unless something major happens, such as a job change, divorce, death, growing family, relocation, or financial emergency, many of these homeowners are going to stay put.
And the 40% who own free and clear are not under the same financial pressure either. Many of them are older, more established, and not forced to make a move.
So, when someone says they are waiting for a crash, the question becomes:

Where is all the distressed inventory supposed to come from?

The group that may be most vulnerable is the remaining 30% of homeowners with rates above 4%. These are more likely to include recent buyers who purchased at higher prices, with higher payments, and less equity built up.
Could some of those homeowners get into trouble?
Absolutely.
But to create a major housing crash, you usually need a major wave of forced selling. Based on this breakdown, the group most likely to be financially pressured is much smaller than many people think.
That is one reason this market has held up even with higher interest rates, affordability issues, and a weaker-feeling economy.
Low-rate homeowners are staying put. Mortgage-free homeowners are not being forced to sell. Inventory stays low. And low inventory keeps prices stronger than many buyers expect.
That is the part many fence-sitters are missing.
If you are waiting for a crash, you need to ask yourself where the supply is going to come from. A large portion of homeowners either have no mortgage or have a mortgage rate they may never see again.
And what happens when rates eventually come down?
You got it.
More buyers come back into the market. Demand increases. And if inventory is still tight, that puts upward pressure on prices.
So, waiting for lower rates could mean you get the lower rate, but you may also be paying a higher price for the house.
That is why trying to perfectly time the housing market is so difficult.
The crash may not come the way people expect, because too much of the market is either locked in, paid off, or simply not under pressure to sell.
One funny thought: those sub-4% mortgages will eventually disappear.
It just might take another 25 years and then 70% of the market will be free and clear!  LOL.
Just another long answer of why your fence-sitters need to get off the fence! Let me know if you need my assistance with that.

Interest Rates
Interest rates are just not cooperating!
Rates looked much better two weeks ago, but they have moved back up. The economy is still struggling, and global uncertainty continues to create inflation concerns.
Hopefully, we get some better news soon and rates settle back down.

Loan Programs Snapshot
Here is a quick look at where things are currently:

Additional options available:

Rates are subject to change without notice.

Condo Update
Good News – None today.
Bad News – Nothing new.

We still love your non-warrantable condo loans!
Need help checking a condo? Call me, and we can look it up in real time.
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https://mikemeena.com/non-warrantable-condos/

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