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Working Paper
Locked In: Mobility, Market Tightness, and House Prices
Rising interest rates in 2022 significantly increased moving costs for homeowners with low fixed-rate mortgages, leading to a sharp drop in mobility. After accounting for biases from selective refinancing, we find mortgage rate "lock in"– the decline in moves due to the rising gap between market rates and homeowners' fixed rates– explains 44 percent of the drop in mortgage borrower mobility from 2021 to 2022. This effect primarily reflects fewer local moves, with only modest impacts on moves across labor market areas. Consistent with a housing search model, we show that under certain ...
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What Is Driving the Differences in Inflation Within the Midwest?
In this article, we explore differences in inflation dynamics across cities (and other areas) within the Midwest. We look independently at the impact of consumption patterns and price changes by expenditure categories, and find that the recent gaps in inflation across midwestern cities have existed largely because of disparities in price changes for housing and transportation, as well as differences in the consumption patterns (as captured by expenditure weights) for transportation and housing.
Working Paper
A Theory of Housing Demand Shocks
Housing demand shocks in standard macroeconomic models are a primary source of house price fluctuations, but those models have difficulties in generating the observed large volatility of house prices relative to rents. We provide a microeconomic foundation for the reduced-form housing demand shocks with a tractable heterogenous-agent framework. In our model with heterogeneous beliefs, an expansion of credit supply raises housing demand of optimistic buyers and boosts house prices without affecting rents. A credit supply shock also leads to a positive correlation between house trading volumes ...
Working Paper
What are the Perceived Barriers to Homeownership for Young Adults?
As the U.S. emerges from the Great Recession, there is concern about slowing rates of new household formation and declining interest in homeownership, especially among younger households. Potential reasons that have been posited include tight mortgage credit and housing supply, changing preferences over tenure in the wake of the foreclosure crisis, and weak labor markets for young workers. In this paper, we examine how individual housing choices, and the stated motivations for these choices, reflect local housing affordability and individual financial circumstances, focusing particularly on ...
Working Paper
Locked In: Rate Hikes, Housing Markets, and Mobility
Rising interest rates in 2022 introduced large moving costs for homeowners with low, fixed-rate mortgages. Using a novel dataset linking mortgage loans, consumer credit profiles, and property sales, we examine the effects of rate hikes on household mobility and the broader economic impacts of the resulting mortgage rate lock-in. As market rates rise relative to those on borrowers’ existing loans, likelihood of moving falls with the highest elasticity among borrowers just “in the money.” Our results suggest about 44% of the decline in moves among mortgage holders between 2021 and 2022 ...