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In a clash of opposing forces, the U.S. housing market finds itself embroiled in a fierce battle. On one side, deteriorated affordability resulting from a spike in mortgage rates from 3% to over 6% in 2022, just after national home prices surged by more than 40% during the Pandemic Housing Boom, is exerting downward pressure on home prices. On the other side, the scarcity of existing inventory, exacerbated by the so-called “l(fā)ock-in effect,” as many homeowners are reluctant to sell and buy anew, fearing the trade-off from a 2% or 3% mortgage rate to one in the 6% to 7% range, is exerting upward pressure on home prices.

Housing economists say neither force should be ignored.

The surge in mortgage rates in 2022 caught many prospective buyers off guard, diminishing their purchasing power and making homeownership less affordable. With mortgage rates doubling in such a short period, housing affordability (or better put the lack of affordability) as tracked by the Federal Reserve Bank of Atlanta has reached levels unseen since the height of the bubble in 2006. That affordability crunch translated into a home price correction last fall, which packed its biggest punch in overheated Southwest and West Coast markets. That affordability crisis continues to leave many potential buyers on the sidelines, thwarting demand and leading to a slowdown in home sales.

Simultaneously, the housing market is being strained by a lack of available inventory. The lock-in effect, a term used to describe homeowners’ hesitance to sell their properties due to the fear of higher mortgage rates, has resulted in a dearth of existing homes on the market. Homeowners, enjoying historically low interest rates, are reluctant to relinquish their favorable financing terms, creating a bottleneck in the housing supply. According to Realtor.com, there were 26.2% fewer homes listed for sale in June 2023 than in June 2022, and 28.9% fewer than in June 2019. This limited inventory has fueled competition among buyers, and caused home prices to rise in the first half of the year—the seasonally strong part of the year—in most markets.

To better understand the "lock-in effect," consider the fact that 91% of mortgage borrowers have an interest rate below 5%, including 70.7% with an interest rate below 4%. For those homeowners, it simply doesn't make a lot of sense to sell and purchase a property right now at a 6% or 7% mortgage rate.

It is not just prospective buyers and sellers feeling the strain; the ramifications extend to the real estate professionals who depend on transaction volume to make a living. With the rapid deterioration of housing affordability and the scarcity of available homes, real estate agents and brokers are grappling with limited opportunities to facilitate sales and earn commissions. The dwindling transaction volumes have dealt a blow to their financial stability and jeopardized the viability of some businesses.

So who will win out? Will strained affordability see national home prices drift lower, or will a lack of existing inventory drive national prices higher?

According to firms like Zillow and CoreLogic, national house prices have already hit bottom and are projected to continue rising over the next 12 months. The scarcity of existing inventory, they say, leaves buyers with no choice but to drive prices higher.

Moody's Analytics chief economist Mark Zandi holds a different view. He anticipates housing affordability will improve over the next few years, as mortgage rates slowly drift from around 6.5% in 2023 to 5.5% in 2025, and as national house prices ultimately fall around 8% from peak-to-trough. In other words, Zandi expects strained affordability to overcome the lack of inventory.

"In our thinking this [price] weakness plays out over the next three years, there's no cliff event here, it's more of a slow grind lower," Zandi tells Fortune.

If, by any chance, Zandi's team is mistaken and "prices end up being stronger than anticipated," he asserts that it would be due to the prevailing lock-in effect, as individuals choose to hunker down and the shortage of inventory continues to drive national house prices upward.