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Update on the “Lock-in Effect” in the Housing Market: Below

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Share of ARMs originations fell further and is at historic lows: FHFA’s National Mortgage Database. By Wolf Richter for WOLF STREET. The super-low mortgage rates of 2020 to 2022 — the average 30-year fixed mortgage rate dropped below 3% even as inflation shot toward 9% — are one of the factors in this frozen housing market, where sales of existing homes have plunged by nearly 25% from 2019 for the...
The strongest version of this narrative highlights a structural distortion in the housing market caused by the Fed’s unprecedented monetary policy. The data undeniably shows how ultra-low mortgage rates created a "golden handcuff" effect, locking homeowners into place and suppressing supply. The slow decline in low-rate mortgages—despite life events forcing some sales—underscores the depth of the freeze. The article rightly critiques the Fed’s role in inflating the bubble, where negative real mo...