The Lock-In Effect of Rising Mortgage Rates with FHFA’s Jonah Coste

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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.
About Jonah Coste
Jonah Coste conducts research on housing and mortgage markets at the Federal Housing Finance Agency (FHFA) and is especially interested in topics related to household decision-making and housing supply. He also has experience working on consumer finance topics at the Federal Reserve Bank of Philadelphia. He received his Ph.D. in Economics from George Washington University and his B.S. in Computational Finance from Carnegie Mellon University.
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.
Altos Research is the premier resource for real-time real estate data. We provide weekly market statistics, analysis and reporting for 99% of the zip codes in the U.S., helping real estate professionals, investors, financial institutions, and their clients make better-informed decisions.
Featuring Mike Simonsen, President of Altos Research
A true data geek, Mike founded Altos Research in 2006 to bring data and insight on the U.S. housing market to those who need it most. Altos provides national and local real estate data to financial institutions, real estate professionals, and investors across the country, and the company is now part of HW Media, publisher of HousingWire and RealTrends. Mike uses Altos data to identify trends in the real estate market well before the headlines, and his work has been featured in the New York Times, The Atlantic, Fortune, Forbes and other publications.
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Altos Research is now part of HW Media! Check out their channel at @HousingWire for more housing market insights.

[@chriscermak3188]

Another great topic Mike.

[@REWatchman]

Great content, thought provoking

[@omarthegreat4179]

Great show

[@peterbedford2610]

Persistent inflation and a ~3% mortgage.... In 5 years the payments will seem laughable.

[@kurtisfoster4831]

Great stuff

[@espinafranco]

Great show!

[@sleeplessinflorida]

Good information, but it is so hard to listen😊

[@REWatchman]

I posted some data on my new channel - markets with high % military are less sensitive to lock in effect due to those who serve not having the luxury to hold low rate if redeployed

[@desmondthornton]

Uh em, Uh em, Uh em... That's all I heard on this show lol

[@user-kc4vr3uq1s]

What I heard was incredibly insightful words from an unbelievably gifted young researcher.

[@AltosResearch]

we all do our best, man.

[@NeoSoulCrew]

Uh um ehm

[@gloriaperez4939]

I was going to say the same thing