Too many owners have affordable mortgages worth keeping, which is a problem for the real estate market.

In addition to high mortgage rates and high housing prices, the lack of existing homes for sale keeps new buyers waiting. In a recent CNET Money investigation13% of U.S. adults said having access to more inventory would help them consider buying a home.

The limited supply of housing is due in part to the “price lock-in effect.” Owners who locked themselves out historically low mortgage rates At the start of the pandemic, they can’t afford to increase (in some cases, double) the interest rate on their home loans, so they stay put.

Fewer sellers mean fewer options for buyers looking for a home in the market. “It’s brutal, it’s really, really hard,” says Maja Sly, broker at Keller Williams.

THE Federal Reserve should do his second interest rate cut this year, on November 7, by a quarter of a percentage point (0.25%). But don’t expect mortgage rates to drop dramatically any time soon. In fact, after the Fed’s first rate cut in September, mortgage rates jumped nearly 7%. The central bank’s interest rate decisions influence home loan rates, but it does not set them directly.

It will take several months of weaker economic data and additional Fed rate cuts for mortgage rates to fall significantly. However, as this happens, more homeowners could start packing up and moving, potentially opening up more inventory.

Learn more: Mortgage rates of 4% could unlock housing market for most Americans, CNET survey finds

Limited housing inventory and high housing prices

The rate lock effect leads to depressed housing supply in several different ways. Some homeowners with low interest rates simply don’t to want sell their house, even if they can afford to buy a new one.

But more often than not, persistent inflationary pressures and the high cost of living make it impossible for many homeowners to move, even if they want to, according to Sly. Those with a 2.5% interest ratefor example, would see their mortgage payments skyrocket if they purchased a comparable home today, and not just because of current rates. House prices are also up 47% since the start of 2020.

“Housing prices and inflation have really outpaced incomes,” Sly says.

In the CNET Money investigation45% of U.S. adults said falling housing prices would play a role in their decision to buy a home. In other words, buyers are sensitive to high listing prices and homes aren’t flying off the shelves, says Vickey Barron, broker at Compass.

In addition, prices are caught in the crosshairs of supply and demand: with many buyers and few homes available, prices are increasing. Sly says many sellers feel they can raise prices even if the quality of the home doesn’t justify it. And sometimes they can get away with it, especially if people move from high-priced markets to cheaper cities and don’t mind paying.

Another major problem for the real estate market? Sellers are usually also buyers. So even when the rate lock-in effect subsides, sellers looking for homes to sell could increase competition and drive up prices.

Of course, the other side of the housing stock equation is new housing construction. Last year, newly built houses have become an increasingly popular option for buyers who can afford them.

Learn more: Mortgage rates aren’t the only obstacle for home buyers. There aren’t enough houses

What will it take for owners to start selling?

Although the The Fed cuts rates by 0.5% in September is good news, experts agree that it is not enough to get the real estate market out of this impasse.

“It’s very positive, but it’s not going to be a tsunami of (sellers) now,” Barron says.

Fed Chairman Jerome Powell acknowledged this in his remarks of September 18 following the reduction in rates. “As rates go down, people will start moving around more, and that’s probably already starting to happen,” he said.

But he warned that the biggest problem is that the country is not build enough new houses increase overall supply, which would also reduce pressure on house prices. “This is not a problem the Fed can really solve,” Powell said.

Sly said mortgage rates will need to get back down into the 4% range for people to start selling and moving into new homes. Half of American adults CNET Money investigation said a mortgage rate of 4% or less would allow them to realistically consider buying a home or refinancing.

And 29% of respondents said there was no mortgage rate that would allow them to realistically consider buying or refinancing a home. This highlights the challenges posed by low stocks, high real estate prices and inflation, regardless of interest rates.

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