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Is Mortgage Lock-In Responsible for Housing Market Tightness?

Author

Listed:
  • Aaron Graybill

  • Kyle Mangum

Abstract

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.

Suggested Citation

  • Aaron Graybill & Kyle Mangum, 2026. "Is Mortgage Lock-In Responsible for Housing Market Tightness?," Working Papers 26-33, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:103512
    DOI: 10.21799/frbp.wp.2026.33
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    File URL: https://www.philadelphiafed.org/-/media/FRBP/Assets/working-papers/2026/wp26-33.pdf
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    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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