The housing market “lockdown effect” is very real – just look at this map

Throughout the pandemic housing boom, homebuyers have been jumping at the chance to secure mortgages at rates as low as 2% to 3%, creating a whirlwind of housing market transactions. But now, a growing frustration is seeping into the industry as those bafflingly low rates have given way to a stark reality of higher rates and fewer transactions. What caused this shift in the housing market? Enter the “lock effect,” a term that causes real estate professionals to sound the alarm and grapple with the consequences of the sudden change.

The idea of ​​the “lock effect” is that homeowners are reluctant to sell their properties — and buy something new — because of the financial shock that would come with missing out on historically low mortgage rates for something with a 6% or 7% interest rate.

Sean Dobson, founder and CEO of Amherst Real Estate, may have summed up frustration best when tweeted recentlyFinancing this at 3%. [mortgage rates] Then jump rates to 6%. [rates] It’s the same as burning it [the homes] From a presentation perspective.”

Dobson, who runs one of the largest single-family homeowners in the United States, was responding to a map I made luck (See below) shows the massive drop in the number of homes for sale across the country.

This so-called “locking effect” occurs almost everywhere. Resilient East Coast markets such as Richmond, VA and Philadelphia saw new listings decline by 27% and 26%, respectively, year-over-year. While even Austin, a market still going through a home price correction, saw a 31% year-over-year decline in new listings on between June 2022 and June 2023.

According to, the number of homes for sale in the United States decreased 26% in June 2023 from June 2022, and 28.9% less than in June 2019.

To better understand the effect of locking in, just consider the fact that 91% of mortgage borrowers have an interest rate of less than 5%, including 70.7% with an interest rate of less than 4%. For homeowners, it doesn’t make sense to buy and sell a property right now with a mortgage rate of 6% or 7%.

The limited amount of inventory on the market stoked competition among buyers and caused home prices to rise in the first half of the year – the strong seasonal part of the year – in most markets. The Northeast and Midwest markets, in particular, saw stronger-than-expected home price gains this spring.

However there are some exceptions.

Just take a look at the Austin housing market, and you’ll see something extraordinary happen. Despite a sharp 31% drop in new listings (that is, homes for sale in a given month), Austin home prices are still down 13% from their peak, according to Black Knight. The reason for this interesting phenomenon is that the total supply on the market (i.e. active listings) increased by 47% year-on-year, even as new listings declined. Austin home prices skyrocketed about 60% in the first two years of the pandemic, creating a huge shock to affordability once mortgage rates went up, causing homes to stay longer on the market. Instead of watching sellers rush in, Austin is seeing a cumulative effect, driving home prices there even as most markets are up again.

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Do you want to stay up to date with the housing market? Follow me on Twitter at @employee.

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