Personal Finance

This is the best summary I could come up with:

The gap that has jumped open between these two lines has created a nationwide lock-in effect — paralyzing people in homes they may wish to leave — on a scale not seen in decades.

Indeed, according to new research from economists at the Federal Housing Finance Agency, this lock-in effect is responsible for about 1.3 million fewer home sales in America during the run-up in rates from the spring of 2022 through the end of 2023.

Another way to state how unusual this dynamic is: Between 1998 and 2020, there was never a time when more than 40 percent of American mortgage holders had locked-in rates more than one percentage point below market conditions.

Professor Fonseca and Lu Liu at the University of Pennsylvania also find that homeowners who are more locked in are less likely to move to nearby areas with high wage growth.

Some of these effects may sound similar to the years after the 2008 housing crash, when a different problem — underwater mortgages — trapped many people in homes they wanted to leave.

For the homeowners who’ve so far been unwilling to sell, however, that sum is a good deal less than the $50,000 that locked-in rates are effectively worth to the typical mortgage holder.

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