The housing market is so tight because 90% of homeowners locked in lower mortgage rates before last year's surge

• A report from Redfin found that 91.8% of US homeowners with mortgages have an interest rate below 6%.
• That's just below the record high of 92.9% reached in 2022.
• Many homeowners are unwilling to part with lower rates they secured prior to the spike, keeping inventory tight.

The housing market's tight inventory doesn't look like it will get much better soon, according to a Wednesday Redfin report.

That's because 91.8% of US homeowners who currently have a mortgage are paying for it at an interest rate below 6%, locking in cheap financing before rates spiked around the middle of last year. 

The number of owners with a mortgage rate below 6% is just below the record high of 92.9% reached in the middle of 2022. 

With the average 30-year fixed rate mortgage clocking in at 6.71% this week — sticking close to the highest level in two decades — the majority of American homeowners are unwilling to wade into the market and face financing a new home purchase at a higher rate. 

In fact, 82.4% of homeowners have a mortgage rate below 5% and 62% have a rate below 4%, per Redfin. Notably, 23.5% of homeowners have a mortgage rate below 3%, almost the highest proportion with a rate that low on record.

In Redfin's view, the stats are the primary drivers of the shortage of new home listings. The number of newly listed homes as well as the total number of listings have both plunged to the lowest on record for this time of year.

These figures are fueling competition between Americans who are looking to buy a home, and that's also preventing home prices from falling. 

With mortgage rates still high and potentially set to rise further, that could mean fewer and fewer current homeowners will opt to sell and re-enter the market. And without additional inventory, the bubble in US home prices could keep growing.

Edward Seiler, the Mortgage Banker Association's associate vice president for housing economics, told Insider in a recent interview that the housing market has never been this unaffordable for new buyers. 

The group's Purchase Applications Payment Index hit a record high in June, suggesting declining borrower affordability conditions due to either increasing loan amounts, rising rates, or decreasing earnings. 

"For new home buyers, this is the worst situation since the end of the Great Recession," Seiler said. "Current homeowners that were lucky enough to get a 2.75% interest rate in 2022 are in a great position, but for new home buyers looking to buy a first home, or those looking to move to another home, it's a very daunting proposition."