Homebuyers, Owners, & Renters
      
      Homebuyers, Owners, and Renters

          
                        Business Partners
                  Single-Family Business

Helping lenders serve homebuyers and homeowners with affordable mortgages
    
          Multifamily Business

Financing for quality, affordable rental housing in every market, every day
    
          Capital Markets

Reducing risk and enhancing housing finance liquidity
          About Us
                toggle
                Who We Are
                                              toggle
                        Awards and Recognition
                                                      Diversity and Inclusion
                                                              toggle
                                Employee Resource Groups
                                                                      Progress With Purpose
                                                      Employee Code of Conduct
                                                      Community Engagement
                                                      History
                                      What We Do
                                              toggle
                        Duty to Serve
                                                              toggle
                                Manufactured Housing
                                                                      Affordable Housing Preservation
                                                                      Rural Housing
                                                                      Research Initiatives
                                                                      Colonias Investment Areas
                                                      Homeownership
                                                              toggle
                                Access to Mortgage Credit
                                                                      Restrictive Covenants
                                                      Innovation
                                                      Mortgage Finance in America
                                                      Financial Performance
                                                      Disaster Resiliency and Relief
                                                      Pilot Transparency
                                      Leadership Team
                                      Corporate Governance
                                              toggle
                        Corporate Governance Guidelines
                                                      Fannie Mae Charter
                                                      Board of Directors
                                                      Committees
                                                      Committee Charters
                                                      Code of Conduct
                                                      Bylaws
                                                      Contacting the Board of Directors
                                                      Housing Reports
                                      Investor Relations
                                              toggle
                        Quarterly and Annual Results
                                                      Annual Reports
                                                      SEC Filings
                                                              toggle
                                All SEC Filings
                                                                      Annual Filings
                                                                      Quarterly Filings
                                                                      Current Reports
                                                                      Section 16 Filings
                                                                      Proxy Filings
                                                      Additional Disclosures
                                                              toggle
                                Monthly Summary
                                                                      Capital Disclosures
                                                      Stock Information
                                                      Current Stock Information
                                                      Contact Information
                                      ESG
                                              toggle
                        Learn about our business
                                                      Environmental
                                                      Social
                                                              toggle
                                Equitable Housing Finance Plan
                                                      Governance
                                                      Sustainable Bonds
                                                              toggle
                                Green Bonds
                                                                      Social Bonds
                                                      Reports & Disclosures
                                                              toggle
                                2021 ESG Report
                                      Research & Insights
                                              toggle
                        Forecast
                                                              toggle
                                Monthly Archive
                                                                      Weekly Archive
                                                      Surveys & Indices
                                                              toggle
                                National Housing Survey
                                                                      Mortgage Lender Sentiment Survey
                                                                      Fannie Mae Home Price Index
                                                                      Refinance Application-Level Index
                                                                      Special Topics
                                                      Publications
                                                              toggle
                                Fannie Mae Working Papers
                                                                      Housing Insights
                                                                      Partner Research
                                                                      Publications Archive
                                                      Perspectives
                                                              toggle
                                Archive - 2020
                                                                      Archive - 2021
                                                                      Archive - 2022
                                                                      Archive - 2023
                                      Newsroom
                                              toggle
                        News
                                                      Media Resources
          
                        Careers
                toggle
                Our Teams
                                              toggle
                        Corporate Teams
                                                      Data & Analytics
                                                      Digital & Technology
                                                      Mortgage & Customer Solutions
                                                      Risk Management
                                      Life at Fannie Mae
                                      Diversity & Inclusion
                                      Benefits & Professional Development
                                      Campus
          
                        Contact Us
                      
            Google Translate Disclaimer
            The Google Translate feature is a third-party service that is available for informational purposes only. Fannie Mae is unable to guarantee the accuracy of any translation resulting from the tool and is not responsible for any event or damage that occurs as a result of using the translations generated by the Google Translate feature.
            OK
  Translate
        Translation Disclaimer
          Chinese, Traditional
            English
            Filipino
            Korean
            Spanish
            Vietnamese
 FM Site Nav
  

        

Homepage
                    
      Fannie Mae logo
    Toggle navigation
      Rent
                
                All Renter Resources
                                      The Rental Process
                                      Make Your Rent Count
                                      Credit Basics
                      
            Buy
                
                All Homebuyer Resources
                                      7 Steps to Homeownership
                                      HomeView Homeownership Education Course
                      
            Own
                
                All Homeowner Resources
                                      Make the Most of Your Home
                                      Refinancing Your Mortgage
                                      When It’s Time to Sell
                      
            Get Relief
                  Manage Financial Uncertainty

All Resources to Manage Financial Uncertainty

Help for Homeowners

Help for Renters

Protect Yourself from Fraud
    
          Recover from a Disaster

All Resources for Recovering from a Disaster

Recovery Assistance for Homeowners

Recovery Assistance for Renters

Protect Yourself from Fraud
                      
            Calculators & Tools
                
                All Calculators & Tools
                                      Tools for Renters
                                      Tools for Homebuyers
                                      Tools for Homeowners
                                      HomeView® Homeownership Education Course
                                      Glossary
                                      Mobile AppToggle search
 Skip to main content
          
    
    Home
                        Research and Insights
                        Perspectives
                        'Lock-in Effect' Not the Only Reason for Housing Supply Woes
    Perspectives Blog
'Lock-in Effect' Not the Only Reason for Housing Supply Woes
October 30, 2023
Mark Palim
    Mark Palim
    Vice President and Deputy Chief Economist
              Rachel Zimmerman
    Rachel Zimmerman
    Market Research Advisor, National Housing Survey Lead
An unintended consequence of the policy response to the COVID-19 pandemic was a dramatic decline in mortgage rates that allowed millions of homeowners to refinance their mortgage at rates well below current levels. Additionally, as housing needs changed and mortgage rates moved lower, home sales jumped, growing approximately 14% from 2019 to 2021 compared to a much slower 1% increase from 2018 to 2019.

In 2022, mortgage rates doubled. Consumers adjusted to those rising rates, in part, by purchasing fewer homes, and so homes sales declined nearly 18% year over year. This year, while *new* home sales have rebounded, the paucity of *existing* home sales has persisted, declining from a peak annualized sales pace of 6.6 million units in January 2021 to 4.0 million annualized in August 2023. In fact, as of August, the number of existing homes for sale hovered around 1.1 million, 40 percent below the level seen in August 2019, pre-pandemic1. As of this writing, in 2023, the 30-year fixed-rate mortgage is at 7.79 percent, more than one full percentage point above where they were at the end of 2022.2

Many market observers, including us, have often attributed the decline in home listings to the so-called mortgage rate "lock-in effect" – or the disincentive for existing homeowners to sell their homes because their current mortgage rate is well below current market rates.

To better understand this effect, in the first quarter of 2023 we asked homeowners via our National Housing Survey® if they planned to stay longer in their current homes than originally intended and, if so, why. In summary, we found that:

An equal share (29%) of people with a mortgage (mortgage borrowers) and outright owners (homeowners without a mortgage) said that they ***do*** plan to stay in their home longer than originally intended, while 45% of mortgage borrowers and 49% of outright owners said they ***do not*** plan to stay in their home longer than they originally intended.
	While mortgage borrowers indicated that being "locked-in" to a low mortgage rate was the leading reason for staying longer in their homes (21%), there were other reasons close behind, including that they like their current home (19%) and that home prices are too high to buy another home (13%).These findings, as well as others from the survey, indicate that there is more to the decline in existing homes for sale than just the lock-in effect.

***Mortgage rate lock-in is only one reason for staying put***

Going into the study, our hypothesis was that a large majority of mortgage borrowers would say they planned to stay in their homes longer than originally intended due to having a significantly lower mortgage rate than current rates. However, the research findings did not show this.

Only 29% of mortgage borrowers told us that they plan to stay in their homes longer. Importantly, of that population, 21% said this was primarily due to having a low mortgage rate, a subset that would represent only 6% of all mortgage borrowers. The other top reasons for staying put were "I like the home/location" at 19% and "home prices are too high to buy" and "my job and family are located here" at 13% each.


Click image above for larger view

Looking at the responses more broadly – by adding together those who responded "yes" and "maybe" to the plan-to-stay-longer question – showed that a slight majority (or 54%) of mortgage borrowers *may*stay in their homes longer. Of those, when asked to pick *all of the reasons* why they would consider staying longer, 62% indicated that having a low mortgage rate was only one of several. This means that, in total, 33% of all mortgage borrowers who *may*stay in their homes longer considered their low mortgage rate to be a factor. Once again, the other top reasons given were "I like the home/location" at 62%, "home prices too high" at 57%, and "job and family located here" at 57%. Altogether, this is a strong indication that borrowers weigh multiple factors when considering how long to stay in their homes, both financial and non-financial.

Of course, nearly half of mortgage borrowers said that they haven't changed the amount of time they plan to stay in their homes, and, as shown above, somewhere between 6% and 33% of current mortgage borrowers plan to stay longer at least partly due to the lock-in effect. These findings suggest to us that a fairly strong majority of mortgage borrowers' future moving plans may not be affected by their mortgage rate.


Click image above for larger view

***Implications***

These survey results lead us to conclude that there are multiple factors contributing to the historically low supply of existing homes for sale. 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.3 Additionally, the low-rate environment during the pandemic accelerated home purchases for many, pulling forward home listings and sales that likely would have been more evenly distributed in subsequent years. There are also demographic and generational shifts to consider: For instance, Baby Boomers represent 32% of homeowners,4 and over 80% have said they would like to age in place.5 This preference is likely also contributing to the supply shortage.

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. For more homeowners to be incentivized to put their homes on the market, other factors beyond mortgage rates may have to change, such as older generations aging out of their homes. As it stands now, and given these results, even if mortgage rates were to decline meaningfully in the intermediate term, we would not expect to see a surge in home listings.

*The authors thank Steve Deggendorf, Doug Duncan, and Matthew Classick for valuable contributions in the creation of this commentary and the design of the research. Of course, all errors and omissions remain the responsibility of the authors.*

*Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's Economic & Strategic Research (ESR) group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.*

1 National Association of Realtors

2https://fred.stlouisfed.org/series/MORTGAGE30US

3https://www.jchs.harvard.edu/blog/despite-pandemic-remodeling-boom-aging-us-homes-require-additional-investment#:~:text=During%20the%20pandemic%2C%20homeowners%20used,record%20height%20of%20%2466%20billion.

4 American Community Survey (ACS), 2021

5https://www.aarp.org/content/dam/aarp/research/surveys_statistics/liv-com/2021/2021-home-community-preferences-chartbook.doi.10.26419-2Fres.00479.001.pdf

TOPICS
  
Fannie Mae Corporate
  
  
      Twitter
              Facebook
              Linkedin
              Email
Research and Insights
                                                              Forecast
                                    Surveys & Indices
                                    Publications
                                    Perspectives
                                                              Archive - 2024
                                    Archive - 2023
                                    Archive - 2022
                                    Archive - 2021

Research Deck

**Related Link**

Questionnaire

Our Company
    About Us
      Contact Us
      Careers
      Investor Relations
      Newsroom
      Research & Insights
      ESG
  Business Partners
    Single-Family Business
      Multifamily Business
      Capital Markets
	      Suppliers
      Developer Portal
  Homebuyers, Owners, & Renters
    Educational Resources
      Credit Basics
      HomeView Homeownership Education Course
      HomePath - Search for Homes
      Make Your Rent CountCalculators & Tools
      All Calculators and Tools      Glossary of Key Terms
      Mortgage Calculator
      Down Payment Assistance Search Tool
      Mobile AppLet Us Help You
      Contact a Housing Counselor
      Manage Financial Uncertainty
      Recover from a Disaster
    
    
  

      
Social media
  

        
            Follow us
          Follow us
          Facebook
          Twitter
          LinkedIn
          Instagram
    Footer
  

        
            Legal
          Privacy
          Digital Accessibility
                Cookie Preferences
            © 2024 Fannie Mae