This research brief summarizes a new working paper by IHS researchers Patric Hendershott, Jin Man Lee, and James Shilling. It finds that rapidly increasing interest rates, along with negative equity, “lock-in” households to their existing mortgages and residences, which reduces housing turnover. Additionally, this research finds that a decline in housing sales due to increasing locked-in households will be greatest in the strongest housing markets, areas that have driven the housing market recovery. This combination of interest rate and equity locked-in households may represent a challenge to housing market stability and economic recovery in coming years.

Publisher: Institute for Housing Studies, DePaul University
Date: February 26, 2014
Format: Research Paper