The U.S. housing market currently presents a financial contradiction that defines the economic reality for millions of households. On paper, homeowners have never been wealthier. The aggregate value of residential real estate has swelled to a historic total equity around $35 trillion. Yet, despite this unprecedented accumulation of wealth, the primary mechanism for accessing liquidity — the traditional cash-out mortgage refinance — has ceased to function for most of the population.
This paralysis comes from the “lock-in effect,” a structural freezing of the market caused by the widening chasm between current interest rates and the historical lows of the pandemic era. With nearly 60% of active mortgages carrying interest rates below 4%, most...
