In this episode of the Top of Mind podcast, Mike Simonsen sits down with Jonah Coste from the Federal Housing Finance Agency (FHFA) to talk about the impact of the mortgage rate “lock-in” effect: where homeowners with low mortgage rates are unwilling to sell and purchase another home at much higher rates.

Jonah shares the findings from FHFA’s recent study on this phenomenon – including the fact that for every percentage point that mortgage rates exceed the origination interest rate, the probability of sale is decreased by 18.1% – and details how this impacts home prices, affordability, and mobility. He also gives his take on whether the lock-in effect has already peaked, and how quickly it may recede from here.

Here’s a glimpse of what you’ll learn: 

• What the mortgage rate lock-in effect is, how it’s measured, and why it’s important
• Key findings from the FHFA report, including how the lock-in effect decreases home sales and leads to higher prices
• The impact of the lock-in effect on mobility, choice, and affordability
• How California’s Prop 13 and other lock-in mechanisms prevent home sales
• How low rates created $3 trillion of net benefit to homeowners, and why we only get that benefit if we stay in our homes
• Whether the lock-in effect has already peaked, and how quickly it recedes from here
• Reasons why 2024 and 2025 may see expanding sales rates despite this lock-in effect
• Some reasons to be optimistic about affordability in the coming years

Related to this episode:

• Connect with Jonah on LinkedIn
• Federal Housing Finance Agency
• Working Paper 24-03: The Lock-In Effect of Rising Mortgage Rates
• Mike Simonsen on LinkedIn
• Altos Research

The Top of Mind Podcast is produced by Altos Research. Each week, Altos tracks every home for sale in the country – all the pricing, and all the changes in pricing – and synthesizes those analytics to make them available before becoming visible through traditional channels.