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Working Paper
Mortgage Lock-in, Lifecycle Migration, and the Welfare Effects of Housing Market Liquidity
We use a search and matching model to study the heterogeneous welfare effects of housing market illiquidity due to mortgage lock-in over the lifecycle. We find that younger home buyers are disproportionately affected by mortgage lock-in, which disrupts their typical pattern of moving to higher-quality neighborhoods. We estimate a model with heterogeneous seller-buyers bargaining within markets defined by CBSA-income terciles and with endogenous migration across markets. We find that on average mortgage lock-in reduces household listing probabilities by 21 percent to 23 percent, increases time ...
Working Paper
Mortgage Lock-in: A Review of the Literature
This paper reviews the rapidly growing literature on mortgage lock-in and its effects on household mobility, labor reallocation, home sales, owner-occupied prices, and spillovers into rental and commercial markets. We then discuss two future research directions: (1) separately identifying lock-in effects from the direct effects of the existing interest rate on the mortgage, which have different implications for household behavior as market interest rates rise, and (2) assessing the general-equilibrium consequences of reduced mobility on labor markets and productivity. We close by discussing ...