The 30-year fixed mortgage rate just hit 8% on Wednesday—a two-decades high, according to Mortgage News Daily. The last time mortgage rates were this high was back in 2000, historical Federal Reserve data shows. That was ahead of Fannie Mae and Freddie Mac purchasing billions in subprime mortgages and the subsequent housing bubble. 

Today, “the housing market remains fraught with significant affordability constraints,” Sam Khater, Freddie Mac’s chief economist, said in an Oct. 12 statement. “As a result, purchase demand remains at a three-decade low.” 

A high-rate environment coupled with other affordability challenges have left buyers, sellers, and private real estate investors in a bind. Many feel as if they can’t make a move out of fear of acquiring higher monthly payments. Indeed, some homeowners could be spending more than 60% of their paychecks on their mortgage alone, Black Knight data indicates.

But mortgage rates continue to rise despite the Federal Reserve’s decision to hold rates steady in September at 5.25%. Freddie Mac says the increase of “ongoing market and geopolitical uncertainty”—that is, the conflict in the Middle East—are to blame for the high rates. Projections released by the Fed show they could hike rates to 5.6% by the end of the year.

“The Fed’s commitment to ‘higher for longer’ that was expressed in their forecasts and statement at the September meeting was clearly taken to heart,” Mark Fleming, chief economist at Fortune 500 financial services company First American, tells Fortune. 

That has pushed mortgage rates to 8%, and they might not be done climbing. “It is likely they will stay around that level … in the last few months of the year, especially if the Fed does raise rates one more time before the year is done,” Fleming says.

Although some real estate experts predict rates could decrease after a year or so, “they will never return to the 2%-to-3% range they were previously,” Rhett Wiseman, a private real estate investor, tells Fortune. He owns and has invested in more than 200 residential properties in the Northeastern and Midwestern markets, and advises prospective Section 8 housing investors.

“Homebuyers and homeowners should brace themselves for rates above 6%. Even if interest rates fall more, I expect they will finally stabilize between 5.5% and 6.5% for the foreseeable future,” Wiseman says. “I don’t believe it will cause a crash; rather, I believe it will simply become the new standard by which we live.”

The ‘lock-in’ effect

Some real estate experts argue that this high-rate environment is actually the toughest on sellers—or would-be sellers who are reluctant to put their homes back on the market only to turn around and be forced to lock in at a 7%-8% mortgage rate. That’s because many of these would-be sellers bought during the pandemic, when buyers enjoyed sub-3% rates.

Buyers, on the other hand, are more so taking a “wait and see” approach and holding out for when and if mortgage rates drop. Realtor.com chief economist Danielle Hale calls this gap between market rates and rates people currently have on mortgages the “lock-in effect.” Indeed, 82% of people looking to buy or sell a home feel as if they shouldn’t make a move and lose their lower mortgage rate, an April Realtor.com report shows.

The lock-in effect can also explain the abysmal inventory levels in the U.S. Indeed, housing inventory levels are at near-historic lows. Between September 2018 and September 2023, the average number of homes on the market dropped a whopping 60% to about 700,000 active listings, according to Realtor.com.

“Homebuyers are often first-home sellers, so the rate lock-in effect is reducing the supply for sale,” Fleming explains. “You can’t buy what’s not for sale, if a prospective first-time homeowner or investor.”

The “lock-in effect” also changes the equation for pure investors. The longer rates stay higher, the more the home has to appreciate to be an asset that makes sense, explains Marty Green, principal at San Antonio–based mortgage law firm Polunsky Beitel Green. This is “good news for consumers because they are competing less and less against all-cash offers from investors,” he adds. “Inventory for consumers with the ability to qualify has actually improved in recent months as rates have risen. But when rates retreat, we anticipate that investors will reenter the market and that bidding wars with investors offering all cash will once again become common.”

Either way, higher rates makes finding a home or investing in one harder—and less lucrative.

Says Green: “Higher rates, harder decisions.”