The year 2025 will likely bring further relief to the “golden handcuffs” that have kneecapped the housing market in Michigan and beyond for several years.

But many — not all — housing and mortgage experts say economic conditions will do little to bring about the shift. Rather, typical life circumstances will continue to occur — sellers who need a larger home, divorces, new jobs in new cities — and help free up new inventory for hungry buyers.

“What was tolerable in year one and became a little bit of an annoyance in year two. The longer you stay in a situation where you’re in a house that’s too big or too small, the more it becomes a challenge,” said Jeanette Schneider, president of Troy-based brokerage Re/Max of Southeastern Michigan. “And I think those types of things — kind of the life things — I think in large part is going to be a bigger trigger than the economic factors.”

Sometimes called “golden handcuffs,” sometimes called the “lock-in effect,” much of the blame for limited existing housing inventory in Michigan and the rest of the country in recent years has been blamed on the historic low rates experienced in 2020 and 2021 during the COVID-19 pandemic. Millions of Americans bought or refinanced homes at rates in the 2%-3% interest rate range and now see no financial upside to letting go of their homes, or more specifically, their low rates.

Roughly 60% of the nation’s 50.8 million active mortgages are at rates below 4%, according to a report earlier this year by the Consumer Financial Protection Bureau.

Inventory for homes for sale in metro Detroit and elsewhere, however, has shown signs of improvement in recent months. Nationally, at the end of November, home inventory was up 10.3% from a year earlier, according to brokerage firm Redfin.

Pontiac-based United Wholesale Mortgage CEO Mat Ishbia spoke recently about the rising inventory levels seen nationally.

“There’s a lot of houses out there,” Ishbia said in a UWM video in early December. “With rates dropping a little bit, there’s an opportunity where affordability is better, more people are selling their houses and that’s why see inventory going up.” 

Ishbia’s counterpart at Detroit-based Rocket Companies Inc., Varun Krishna, is also bullish going into the new year, telling analysts in November that while short-term challenges will be ever-present, the company is working to take the longer view. 

Mortgage interest rates next year are expected to settle around 6% for a 30-year fixed rate — around the lowest point seen in 2023 — and amount to the “new normal,” according to Lawrence Yun, chief economist of the National Association of Realtors.

“Home buyers will have more success next year,” Yun said in a statement. “The worst of the affordability challenges are over as more inventory, stable mortgage rates and continued job and income growth pave the way for more Americans to achieve homeownership.”

But those typical life circumstances mentioned by Schneider are always present in the market, argues Joe Fuca, a mortgage lender with brokerage Simple Home Lending in Macomb Township.

Still, 2025 “is going to be the magic year” for the golden handcuffs to break, Fuca contends. Should mortgage rates drop below 6%, he expects that will be enough to move the needle for many to shed the home that’s tied to their lower rates.

“I’m very confident,” Fuca told Crain’s when asked whether he expects rates to drop below 6% this year. “I think the market is screaming for it.”

Whether those golden handcuffs fully break next year or are just slightly loosened remains to be seen. But most forecasts call for a similar housing market next year as what’s been seen this year.

Online brokerage firm Zillow earlier this month forecast that national home sales in 2025 will grow 7.5% from 2024 to about $4.3 million sales. The company expects home values to grow about 2.6%.

Closer to home, Realtor.com predicts home sales in metro Detroit to grow 2.4% year-over-year and prices will increase about 6.2% from 2024.