Is Mortgage Lock-In Responsible for Housing Market Tightness?

Elevated mortgage rates discourage homeowners from moving, as relocating triggers a reset of mortgage terms — a phenomenon termed “lock-in.” This paper examines whether elevated rates explain recent real estate market tightness: low transaction volumes, low time-on-market, and sustained price growth. Using transaction-level data, we estimate survival models of housing tenures — the probability of sale as a function of tenure and market conditions, including mortgage rate gaps. These estimates quantify missing sellers who have not entered the market because of elevated rates. We then calibrate a search and matching model measuring mortgage rate effects on buyers alongside seller lock-in effects. Results indicate lock-in causes sellers to withdraw, reducing transactions. However, buyers are more sensitive to mortgage rates than sellers are to lock-in, meaning a rate drop would increase sales volumes but not reduce market tightness.