The mortgage rate “lock-in” effect has often been cited as the primary cause of constrained inventory in the existing-home market and declining existing-home sales. New research conducted by Fannie Mae indicates, however, that several other factors, including high home prices and proximity to friends and family, rank just as highly for homeowners planning to stay put. According to Fannie Mae’s National Housing Survey, nearly an equal share of homeowners cited liking their current home and higher mortgage rates as the reason they planned to stay longer in their new home.
While the lock-in effect is real for many consumers, the full range of reasons provided by mortgage borrowers and outright owners for planning to stay in their homes longer paints a significantly more nuanced picture. Several reasons, including simply liking the home and placing value on living near family, friends, and their workplace, have also contributed to the lack of supply.
The pandemic period likely emphasized some of these non-financial factors, as well, since many consumers spent more time in their homes and invested heavily in home remodeling and assorted do-it-yourself projects.
The long-term decline in consumer mobility is another underlying trend that we believe is constraining listings. Census data indicate that the percentage of movers annually has steadily decreased from 16.8% to 12.6% from 2006 to 2022. A Fannie Mae analysis in 2020 showed that existing homeowner mobility rates were 25% lower than during the pre-Great Recession period (circa 2000) and that mobility had declined across all age groups.
All in all, there are a confluence of factors and trends contributing to the lack of housing inventory in the United States, with the lock-in effect functioning as one of several.
