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

Top of Mind

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

Resources mentioned in this episode:

• Connect with Jonah on LinkedIn
• Federal Housing Finance Agency
• Working Paper 24-03: The Lock-In Effect of Rising Mortgage Rates
• Mike Simonsen on LinkedIn
• Altos Research

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. The company now serves the largest Wall Street investment firms, banks, and tens of thousands of real estate professionals around the country. Mike's insights on the market have been featured in Forbes, New York Times, Bloomberg, Dallas Morning News, Seattle PI, and many other national media outlets.

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• Altos on Twitter
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About Altos Research

The Top of Mind Podcast is produced by Altos Research.

Each week, Altos tracks every home for sale in the country - all the pricing, and all the changes in pricing - and synthesizes those analytics to make them available before becoming visible through traditional channels.

Schedule a demo to see Altos in action. You can also get a copy of our free eBook: How To Use Market Data to Build Your Real Estate Business.