Real Estate

Can 4% Mortgages Revive the Stagnant Housing Market?

Home sales slow as high costs and low rates deter buyers despite builder incentives.

byAndres Castro

November 7, 2025, 9:17 AM

Aerial view of a premium housing development with white houses and dense palm trees in Florida.

An aerial view of expensive houses and lush palm trees in a premium housing development in Florida. By MDL.

Executive Summary

Despite aggressive incentives from new homebuilders, including mortgage rates as low as 4%, the housing market remains stagnant with a decade-high number of unsold new homes.

Buyers are deterred by prohibitively high overall monthly payments, even with builder discounts and lower mortgage rates, due to factoring in property taxes and insurance costs.

Potential sellers are reluctant to list their homes, as they are often locked into much lower mortgage rates from years ago, contributing to limited market movement.

The Trajectory So Far

The housing market is experiencing stagnation because potential buyers, despite aggressive builder incentives like lower mortgage rates, still face prohibitively high overall monthly payments due to property taxes and insurance, while many current homeowners are unwilling to sell and forfeit their much lower existing mortgage rates.

Assessing Risk and Value

The significant increase in unsold newly built homes, despite aggressive builder incentives like mortgage rate buy-downs, indicates persistent oversupply and pressure on homebuilder profit margins, potentially impacting their valuations. For investors in residential real estate, the market’s stagnation, driven by high property taxes and insurance costs alongside buyer and seller reluctance, signals a challenging environment with continued low transaction volumes and potential for value stagnation rather than appreciation.

Expert Predictions and Forecasts

Builders’ aggressive incentives, including price cuts and mortgage rate buy-downs, are proving insufficient to stimulate demand as overall monthly payments remain prohibitively high for buyers once property taxes and insurance costs are factored in.

The housing market is anticipated to experience a persistent slowdown in sales activity due to the combined factors of high property taxes, insurance costs, and the reluctance of current homeowners to sell and give up their lower mortgage rates.

Despite aggressive incentives from new homebuilders nationwide, including mortgage rates as low as 4%, the housing market continues to experience stagnation as buyers remain on the sidelines. The number of unsold newly built homes has reached its highest level in over a decade, signaling a prolonged slowdown in sales activity.

Builders are actively cutting prices and buying down mortgage rates significantly below the current average, which hovers around seven-and-a-half percent. These efforts are aimed at stimulating demand and moving existing inventory across the country.

However, these discounts are proving insufficient to attract a significant number of purchasers. Buyers report that even with reduced prices and lower rates, the overall monthly payments remain prohibitively high once property taxes and insurance costs are factored in.

Adding to the market’s inertia, many potential sellers are choosing not to list their homes. They are often locked into much lower mortgage rates secured years ago, making them hesitant to trade up or downsize and take on a new, higher-rate loan.

This dual reluctance from both buyers and sellers has resulted in fewer transactions and a housing market that continues to be characterized by limited movement and a general slowdown.

Market Outlook

The current landscape indicates that while builders are making considerable efforts to incentivize sales, the broader economic factors of high property taxes, insurance costs, and existing low mortgage rates for current homeowners are collectively dampening market activity, leading to a persistent slowdown in home sales across the country.