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The\u00a0lock-in effect<\/a> that has kept U.S. housing market activity subdued probably isn\u2019t going away this year or next year or even the year after that.<\/p>\n It could hang over prospective buyers and sellers of existing homes for six to eight years before finally going away, Bank of America<\/a> warned in a note on Monday, locking down the market into the next decade.<\/p>\n \u201cThe wide gap between current mortgage rates and effective mortgage rates means most homeowners are unwilling to move unless forced,\u201d analysts said. \u201cMoreover we do not expect current mortgage rates to fall much even if the Fed cuts as we anticipate.\u201d<\/p>\n When borrowing costs were lower during the depths of the pandemic as the Federal Reserve slashed rates to near zero, homeowners rushed to refinance, leaving U.S. households with the lowest effective mortgage rate ever on records going back to 1977, according to BofA. It has ticked up about half a percentage point from its trough, but the effective rate was still at a low 3.8% in the first quarter.<\/p>\n As the Fed began hiking rates in 2022 to fight inflation, current mortgage rates went higher as well. Now there\u2019s a big gap in rates.<\/p>\n Earlier this month, a Realtor.com report said more than half of outstanding mortgages have an effective rate of 4% or lower<\/a>, and more than three-quarters have a rate of 5% or lower. Meanwhile, the current 30-year fixed\u00a0rate is still hovering around 7%.<\/p>\n With homeowners unwilling to give up their low effective rates, the supply of existing homes has been tight and this year\u2019s\u00a0spring selling season<\/a>\u00a0has been muted.<\/p>\n Sales of existing homes hit a seasonally adjusted annual rate of 4.14 million in April of this year, barely budging in\u00a0almost\u00a018 months, BofA noted.\u00a0<\/p>\n The bank sees that pace staying relatively flat in the coming years, projecting sales of 4.1 million for all of 2024, 4 million in 2025, and 4.2 million in 2026.<\/p>\n \u201cThe US housing market is stuck, and we are not convinced it will become unstuck anytime soon,\u201d analysts wrote.\u00a0\u201cAfter\u00a0a surge in housing activity\u00a0during the pandemic,\u00a0it\u00a0has\u00a0since retreated\u00a0and stabilized.\u201d<\/p>\n With supply still constrained and demand still elevated from the pandemic-induced shock, BofA expects home prices to jump 4.5% in 2024 and 5% in 2025, before finally cooling off with a 0.5% uptick in 2026. But prices could surge another 5% in 2026 if pandemic-related factors persist, analysts warned.<\/p>\n And don\u2019t expect much help from newly constructed homes. The bank sees housing starts averaging a stable 1.4 million units in 2024, 2025, and 2026, with sales of new homes averaging 650,000 those years.<\/p>\n But others in the real estate sector think even a modest decline in mortgage rates could unlock a burst of housing market activity.<\/p>\n Earlier this month,\u00a0Compass<\/a> cofounder and CEO Robert Reffkin told CNBC<\/a> that he would \u201cfeel good\u201d about a 6.5% rate, \u201cbut the magic number is 5.9999.\u201d<\/p>\n \u201cThat\u2019d be marketing magic, and would tell the world that mortgage rates are at a level where they should go and grab a property,\u201d he said.<\/p>\n<\/div>\n\nSubscribe to the Fortune Next to Lead newsletter to get weekly strategies on how to make it to the corner office. Sign up for free<\/a>.<\/div>\n