Warren Buffett's Berkshire Hathaway and Zillow say mortgage rates can't fall enough for Americans to afford a home

When mortgage rates dropped below 3% during the pandemic, buying a home seemed far more attainable. Since then, however, prospective buyers have been facing a very different reality.

Mortgage rates climbed as high as 8% in late 2023. Rates have since eased—today the average 30-year fixed mortgage rate sits at 6.19%, according to Mortgage News Daily—but economists and housing experts have cautioned that they do not expect rates to decline meaningfully anytime soon. Even more discouraging, some analysts argue that the mortgage rate required to make homes feel affordable again simply isn’t realistic.

Earlier this summer, Zillow economic analyst Anushna Prakash calculated that rates would need to fall to 4.43% for a typical buyer to afford the average home. But, she noted, “that kind of a rate decline is currently unrealistic.” Prakash also pointed out that not even a 0% interest rate would make a typical home affordable in major cities like New York, Los Angeles, Miami, San Francisco, San Diego, or San Jose.

A report released in early July by Warren Buffett’s Berkshire Hathaway HomeServices echoed that mortgage rates are a primary obstacle for both buyers and sellers. The firm wrote that “Many homeowners are reluctant [to] put their homes on the market and give up the low mortgage rates they already have.” It added that “high price gains won’t mitigate their ability to pay more for another home at significantly higher interest rates.”

This dynamic is often called golden handcuffs or the locked-in mortgage rate effect—homeowners don’t want to sell and lose their ultra-low rate, even if they would otherwise move. The result is a ripple effect across the housing market, particularly with inventory.

ResiClub recently reported that homebuilders now have the highest level of unsold completed homes in 16 years. And according to Parcl Labs, the number of active listings this summer climbed to 3.06 million, up 4.9% from a year ago. At the same time, more would-be sellers are pulling their homes off the market when they don’t sell quickly.

Realtor.com Senior Economist Jake Krimmel told Fortune, “Homes are sitting on the market nearly three weeks longer than last year. That’s a sign of sellers still anchored to pandemic-era prices even though the market is telling them otherwise.”

This doesn’t mean the U.S. suddenly has too many homes. The country still faces a shortage of millions of units. What it does mean is that there are not enough buyers who can afford today’s housing prices under current mortgage rates.