Last year, existing home sales fell to their lowest point in almost 30 years, largely due to the so-called lock-in effect. The phenomenon refers to homeowners refusing to sell for fear of losing their low mortgage rates. It happens when mortgage rates escalate suddenly. Throughout the pandemic, mortgage rates were historically low. But when inflation began creeping up, eventually hitting a four-decade high in the summer of 2022, the Federal Reserve raised interest rates. That sent mortgage rates up, and they peaked at just above 8% in October last year. The average 30-year fixed mortgage rate is 7.05%, as of the latest reading. 

“This supply is beginning to thaw, with our measure of seasonally adjusted existing homes for sale showing a steady upward trend since last spring,” Aliaga wrote, referring to existing single-family homes for sale, as the lock-in effect eases. 

Existing home sales jumped 9.5% in February from January, and unsold inventory was at a 2.9-month supply at the current sales pace, up from 2.6 months the prior year, according to the National Association of Realtors. “Some relief should also come from new home supply underway, with 1.6M units currently under construction and housing completions hitting their highest level in 17 years in February,” she wrote, adding that homebuilder sentiment, hiring patterns, and a “chronic undersupply of housing” should equate to more construction in the coming years. However, that doesn’t account for NIMBYism and local control, both of which hinder housing development.

As Fortune has previously reported, this year’s pivotal spring season in the housing world seems to be more of a mini version—new listings are up, but affordability has deteriorated. Home prices are sky-high, and mortgage rates are much higher than what people are used to. 

“Although lower financing costs, rising supply and brightening economic growth prospects may help home sales turn around from the sharp contraction experienced over the past two years, the recovery will likely be limited by adverse affordability conditions stemming from home price appreciation far outpacing income growth over the past several years,” Wells Fargo senior economist Charlie Dougherty and economic analyst Patrick Barley recently wrote. 

Still, Aliaga argued that demand has held strong. Her reasoning? Homeowner and rental vacancy rates are near multidecade lows, which she attributes to immigration, partly, at least.

“A surprising immigration boom may be contributing to this, raising the bar on housing units needed for population growth, but modest declines in rates have seemed to help stimulate activity and improve home affordability,” Aliaga explained.

Mortgage rates are expected to come down further, she said, pointing to Fannie Mae’s forecast predicting mortgage rates to be 6.4% by the end of this year. But she also mentioned the groundbreaking $418 million National Association of Realtors settlement, saying it “may also lower home prices by reducing transaction costs.” That’s still up for debate. 

Nevertheless, the average effective mortgage rate in the economy is 3.8%, according to the note. That’s only “0.5% above its historic low in mid-2022,” she wrote—clearly significantly lower than the current mortgage rate. That means every single homeowner with a lower mortgage rate, or simply no mortgage, is protected from the substantial increase in interest rates. However, she wrote, “this immunity will gradually fade,” likely as mortgage rates normalize and people realize they can’t hold off selling any longer.

“While the recovery in housing market activity will be gradual, resilient supply and demand dynamics underscore that it is not a source of vulnerability for the economy,” Aliaga said.