Nobody's Buying. Nobody's Selling. And the Loans That Do Exist Are Starting to Crack.

Here's a stat that blew my mind when I first saw it: in 2025, only about 28 out of every 1,000 homes in America changed hands. That's a turnover rate of 2.77% — the lowest in at least three decades (Redfin, "Home Turnover Report 2025").

Let that sit for a second. Fewer than 3 out of every 100 homes sold. In an entire year.

We're not in a housing crash. Prices haven't collapsed. There's no wave of foreclosures. And yet the housing market is essentially frozen solid. People aren't buying. People aren't selling. And the numbers say this is the most locked-up the market has been since the early 1980s.

But that's only half the story. Because while the market is frozen on the surface, something ugly is happening underneath.


The Freeze

In 2024, sales of existing homes totaled about 4.06 million — the fewest since 1995, according to the National Association of Realtors. In 2025, the number was nearly identical (NAR, "Existing-Home Sales," 2025). NAR Chief Economist Lawrence Yun called it "another tough year for homebuyers, marked by record-high home prices and historically low home sales."

But here's the thing: in 1995, the housing stock was much smaller. Fewer homes existed. So 4 million sales back then meant a much higher percentage of the market was actually moving. Today, with a significantly larger housing stock, 4 million sales means the turnover rate is the lowest it's been in at least 30 years of tracked data (Redfin).

For context, in 2021, about 44 out of every 1,000 homes sold. Pre-pandemic in 2019, it was about 40 per 1,000. Now it's 28. That's a 37% drop from the pandemic peak (Redfin, "Home Turnover Report 2025").

The historical norm for existing home sales is about 5.2 million per year (PBS News). We've been stuck near 4 million for three straight years. That's not a dip. That's a new baseline.

Economists at First American Financial have drawn a direct comparison to the early 1980s. In their analysis, they said "the current housing market is similar to the market of the 1980s" (First American Economics, 2023). In 1982, existing home sales had fallen nearly 50% from their 1978 peak as mortgage rates spiked to 18%. Today, sales have plunged about 40% from their 2022 peak. The dynamics are almost identical — a rate shock that froze the entire market.


Why Nobody's Moving

There's a term for it: the mortgage rate lock-in effect.

During the pandemic, millions of Americans locked in mortgage rates between 2% and 3%. Now those homeowners are sitting on 2.5% mortgages while the going rate is around 6.5%. If they sell and buy a new home, their monthly payment could nearly double — even if the new house costs the same.

Freddie Mac estimated that the average financial cost of this lock-in effect was nearly $48,000 per borrower as of late 2024 (Freddie Mac, "Economic, Housing and Mortgage Market Outlook," 2024). That's how much more you'd pay over the life of a new mortgage just to make a lateral move.

So they stay put. They renovate instead of relocating. They deal with a longer commute. They make it work because the math of selling doesn't make sense.


The Part Nobody's Talking About

Here's where it gets uncomfortable. While the housing market looks frozen from the outside, the loans underneath are starting to break.

FHA loans — the ones specifically designed for first-time buyers and lower-income Americans — hit a delinquency rate of 11.52% in the fourth quarter of 2025 (Mortgage Bankers Association). That's the highest since Q2 2021. The seriously delinquent rate — meaning 90+ days overdue — increased by 104 basis points compared to a year ago (MBA, Q4 2025).

More than 1 in 10 FHA borrowers is behind on their mortgage right now. And it's getting worse, not better.

But you wouldn't necessarily know that by looking at the foreclosure numbers. Because here's what's been happening behind the scenes.


The Partial Claim Machine

When an FHA borrower falls behind on their mortgage, there's a loss mitigation tool called a "partial claim." The way it works: the government essentially covers the missed payments and tacks them onto the end of the loan as a separate, interest-free lien. You don't have to pay it back until you sell the house, pay off the mortgage, or the loan matures (HUD, "FHA Loss Mitigation Program").

On paper, the loan goes back to "current." The borrower isn't delinquent anymore. The foreclosure doesn't happen. Everybody wins.

Except a lot of these borrowers default again. FHA's own data shows a redefault rate approaching 60% — a number the agency itself has called "unsustainable" (FHA/HUD, Mortgagee Letter 2025-14). Before the pandemic, only 2% of FHA borrowers had received two or more loss mitigation interventions in the past five years. By September 2025, that number was 40% (HUD). They're getting helped, defaulting again, getting helped again, and defaulting again.

FHA has acknowledged this pattern directly, saying it wants to break "the cycle of churning redefaults and interventions" (HUD, 2025).

The share of FHA loans at auction that had partial claims attached jumped from less than 2% in 2022 to nearly 24% in 2025 (Scotsman Guide). That means almost a quarter of the FHA loans that eventually DO go to foreclosure had already been "saved" at least once. Some had multiple partial claims stacked on them.


Where Do the Bad Loans Go?

Here's the other piece: when FHA loans become nonperforming, HUD doesn't always let them go through the normal foreclosure process. Instead, HUD's Office of Asset Sales runs a program where they sell the distressed loan notes in bulk to private investors — before the property ever hits the foreclosure market (HUD, "Office of Asset Sales"). Since 2010, over 100,000 distressed FHA loans have been sold this way (Urban Institute). In 2024 alone, HUD offered roughly 3,880 loans worth about $1.25 billion in bulk note sales. And as of January 2025, this program became permanent (Federal Register, December 2024).

These programs are publicly documented. But the practical effect is that a lot of distressed loans are being handled in ways that keep the foreclosure numbers looking better than they otherwise would.

Loans get deferred through partial claims. If that doesn't work, the notes get sold off in bulk to investors before foreclosure. The homeowner may still lose their home eventually, but it doesn't show up in the headline foreclosure stats the same way it did in 2008.


Why This Should Worry Everyone

In 2008, it was subprime lending — giving people loans they couldn't afford. Today, it's people who got loans they could afford at 2.5% but now can't keep up because their insurance tripled, their property taxes climbed, and their wages didn't keep pace with inflation.

The Mortgage Bankers Association pointed to "a softer labor market, other personal debt obligations, and increases in taxes, homeowners' insurance, and other fees" as the key stressors on FHA borrowers (MBA, Q3 2025). These aren't irresponsible borrowers. These are people getting squeezed from every direction.

Meanwhile, FHA is building record reserves (Inman, January 2026). You don't build record reserves if you're not expecting bigger losses.

Foreclosure filings rose 14% in 2025, totaling 367,460 (ATTOM Data Solutions). Still well below 2008 crisis levels — but trending in the wrong direction. And the real number might be higher than it looks because of all the partial claims and note sales keeping properties out of the formal foreclosure pipeline.

More than 9,400 properties were brought to auction on FHA loans in the first 10 months of 2025 — up 15% from 2024 and up 74% from the 2021 moratorium low (Scotsman Guide).


So where does this go? Nobody's buying. Nobody's selling. The market hasn't been this frozen in over 40 years. And underneath the surface, FHA loans are cracking, getting patched, cracking again, and quietly getting sold off before anyone notices.

If the economy is doing so great, why doesn't it feel that way? What do you guys think? Drop a comment.


Data sources: Redfin — "Home Turnover Report 2025" (turnover rates), National Association of Realtors — "Existing-Home Sales" (sales totals), First American Economics — "1980s Deja Vu for the Housing Market" (historical comparison), Freddie Mac — "Economic, Housing and Mortgage Market Outlook" (lock-in effect), Mortgage Bankers Association (FHA delinquency data), HUD — "FHA Loss Mitigation Program" and "Office of Asset Sales" (partial claims, note sales), Scotsman Guide (partial claim auction data), Urban Institute (DASP program history), ATTOM Data Solutions (foreclosure filings), Inman (FHA reserves).