# REIOS Blog Assembly
## Publishing fields
- **Title/H1:** Wilmington’s Housing Market Is Still Digesting the COVID Boom
- **SEO title:** Wilmington Housing Market: The COVID “Anaconda” Effect
- **Slug:** `wilmington-housing-market-covid-anaconda-effect`
- **Meta description:** Wilmington’s housing market is still digesting the COVID boom. Buddy Blake explains rate lock-in, builder competition, equity and today’s hard seller conversations.
- **Primary keyphrase:** Wilmington NC housing market
- **Secondary topics:** mortgage rate lock-in, Wilmington home sellers, new construction competition, home equity, short sales
- **Author:** Buddy Blake
- **Featured-image text:** WILMINGTON’S HOUSING MARKET IS STILL DIGESTING THE COVID BOOM
- **Featured-image direction:** A professional Wilmington-area residential streetscape with a subtle coastal Carolina setting. Bold, large white title text; high contrast; no snake imagery, distressed homeowners, foreclosure signs or sensational visuals. Keep Buddy Blake’s face unobscured if the AgentAI portrait is used.
- **External podcast placement:** After the introduction, using Apple’s official compact episode player.
- **External episode:** [The Biggest Real Estate Opportunities Right Now — The Brian Buffini Show](
https://podcasts.apple.com/us/podcast/the-brian-buffini-show/id1089027054?i=1000788531071)
- **Required bottom element:** 26 Seller CTA
---
# Wilmington’s Housing Market Is Still Digesting the COVID Boom
The best description I have heard of today’s real estate market came from Brian Buffini: the housing market is like an anaconda that swallowed an enormous meal during COVID. The meal went down, but it will take years to digest.
That analogy fits what I am seeing right here in Wilmington, North Carolina.
This is not the traditional slow market many experienced agents have seen before. In a normal slowdown, inventory climbs dramatically because homeowners continue making ordinary moves—growing families buy larger homes, empty nesters downsize and people move across town. Today, many of those discretionary sellers are staying put.
The market has not stopped. People still buy and sell homes every day. But much of the activity I am seeing is being driven by life events rather than simple preference.
## Recommended listening
Brian Buffini offers a helpful perspective on the demographic and economic forces shaping housing today. I have followed Brian for more than 25 years, and I consider him one of the industry’s most practical, common-sense voices.
**Listen to “The Biggest Real Estate Opportunities Right Now” from *The Brian Buffini Show*.**
> **REIOS embed instruction:** Insert Apple’s official compact episode player for episode ID `
1000788531071`. Clearly attribute the episode to Brian Buffini and *The Brian Buffini Show*. Do not copy, download or rehost the audio. If the destination blocks the player, automatically display the episode artwork, title and a “Listen on Apple Podcasts” button. An embed failure must never stop blog publication.
## Life events are creating much of Wilmington’s resale inventory
One meaningful group of sellers I am working with consists of baby boomers who moved to the Wilmington area years ago—often from the Northeast or another part of the country—to enjoy retirement near the coast. Now some are ready to move again so they can be closer to children, grandchildren or other family members elsewhere in the country.
We are also seeing the difficult situations that have always created real estate decisions: death, divorce, job loss, relocation, health changes and other major events. These owners are not necessarily selling because they believe they picked the perfect moment. They are selling because life has changed.
What we are not seeing in the same volume is the homeowner saying, “Our family is growing, and we would simply like a bigger house.”
For many of those owners, the math does not work. They may have a mortgage rate near historic lows. Moving could mean giving up that payment, buying a more expensive house and financing it at a higher rate. Freddie Mac has documented how this **mortgage rate lock-in effect** can discourage homeowners from selling even when they might otherwise prefer to move.
That is a major reason the resale side of the market feels stuck. We are still digesting the COVID housing boom.
## The hardest conversation is about price
I have already had three difficult seller conversations this week, and it is only Tuesday.
In each case, the owner came into the conversation believing the home should be worth more than current buyers were likely to pay. That expectation is understandable. During the COVID market, sellers watched homes receive multiple offers, sell quickly and sometimes close well above what anyone had predicted.
But the market does not price a house according to its highest estimated value from two or three years ago. It does not price a home based on what the owner needs in order to make the next move. Buyers compare today’s available choices, today’s payments and today’s condition—and then decide.
Some owners are disappointed because they are not going to receive the “triple grand slam” result they imagined. Yet many who bought in 2018 or 2019 may still have substantial equity. Depending on the home, the mortgage balance and the cost of selling, that could mean a gain of $100,000, $200,000 or more. That is still a strong financial position even if the home does not command its pandemic-era peak expectation.
Profit and equity are not automatically tax-free. Certain sellers may qualify to exclude up to $250,000 of gain—or up to $500,000 for some married couples filing jointly—on the sale of a principal residence, but the rules and individual circumstances matter. Every seller should confirm the tax consequences with a qualified tax professional or accountant.
## New construction is changing the competition below $500,000
New construction has become one of the strongest competitors for Wilmington-area sellers, especially around the $500,000-and-under range.
National and regional builders may be able to offer incentives that an individual homeowner cannot. Those incentives can include mortgage-rate buydowns, closing-cost assistance, upgrades or price reductions. A resale seller cannot usually duplicate a builder’s financing package dollar for dollar.
That creates a serious challenge when a nearly new resale home is competing against a builder offering the same—or a very similar—floor plan nearby. If the new home is priced $20,000, $30,000, $40,000 or even $50,000 below what an owner recently paid, and the builder adds a financing incentive, the resale owner can become trapped between the outstanding mortgage and what today’s buyers will pay.
This does not mean every newer home or every neighborhood is losing value. Real estate remains extremely local. It does mean sellers must examine the active builder inventory, incentives, comparable resales and likely buyer payment—not just closed sales from a different phase of the market.
## Some owners may need solutions lenders are not ready to discuss
In a limited number of situations, the likely sale proceeds may not cover the mortgage balance and selling expenses. That raises the possibility of a short sale, loan modification or another lender-approved workout.
My concern is that the real estate industry may recognize some of these cases before lender systems are prepared to process them efficiently. We saw a version of this during the 2006–2009 downturn. It took time for many institutions to build workable short-sale systems, even though an orderly sale could sometimes reduce the lender’s loss compared with a later foreclosure.
I am not predicting that Wilmington is heading into another 2008, and homeowners should not assume they need a short sale simply because an online estimate declined. A true short sale is a specific financial and legal situation requiring lender approval. Owners facing hardship should speak early with their mortgage servicer, an experienced real estate broker, a North Carolina real estate attorney and appropriate tax or financial professionals.
The frustrating reality is that early intervention is not always easy. In some cases, lenders may not offer meaningful options until a borrower meets specific hardship or delinquency requirements. Waiting, however, can reduce the choices available. If the numbers look tight, it is better to calculate the likely net proceeds and ask questions early.
## Luxury homes are not immune
The upper end of the market is beginning to feel pressure, too. Some luxury buyers used short-term or adjustable financing when they purchased. Changes in short-term rates can affect those borrowers differently from homeowners with long-term fixed-rate mortgages.
Mortgage rates do not move in lockstep with the Federal Reserve’s policy rate. Longer-term mortgage pricing is influenced by the bond market, inflation expectations, risk and other forces. That is why a change by the Federal Reserve does not guarantee an immediate or equal change in a 30-year mortgage rate.
For luxury sellers, the lesson is the same: yesterday’s purchase price or estimated value does not set today’s market value. The current alternatives available to qualified buyers do.
## Most long-term Wilmington owners still have good news
This is not the end of the world, and it is not a claim that homes cannot sell. They can—and they are.
The good news is that many owners who purchased before 2021 are likely to be in a strong equity position. The difficult part is accepting that a strong gain may still be less than the number they once expected.
If you need to sell, the goal is not to chase an old market. The goal is to understand today’s market accurately, protect the equity you have and make the next decision with clear eyes.
You cannot price a home based on what you need to receive to make the next chapter work. The market does not know what you owe, what you spent on improvements or what your next home will cost. It only knows what buyers can purchase today and how your property compares.
## Experience matters more in a complicated market
If you must buy or sell in this environment, experience matters more than it did when nearly every properly listed house attracted immediate attention.
This may not be the best time to choose an agent because of a TikTok video, a Facebook post or a personal relationship alone. Your friend, neighbor or fellow church member may be a wonderful person and a capable professional. But a difficult transaction can require blunt pricing advice, uncomfortable financial conversations and choices that put pressure on a friendship.
Choose someone based on the situation you face. Ask whether that agent has worked through changing markets, difficult appraisals, builder competition, lender negotiations and transactions where the first plan did not work.
I have helped Wilmington-area sellers through good markets and hard markets since 1998. I have navigated several difficult cycles, but this one is unique: resale inventory remains constrained by mortgage lock-in while builders hold meaningful inventory and can compete through financing incentives.
That combination calls for honesty, patience and a plan grounded in current evidence—not yesterday’s headlines or tomorrow’s promises.
The COVID housing boom was an enormous meal. Wilmington is still digesting it. That process will take time, but people who truly need to move still have options. The first step is an honest conversation about value, competition, equity and what the market will actually bear.
---
## Frequently asked questions
### Why are fewer Wilmington homeowners selling voluntarily?
Many homeowners have low fixed mortgage rates they would have to surrender when they sell. Buying another home at today’s price and financing cost can make an optional move difficult to justify.
### Can a resale seller compete with a new-home builder?
Yes, but the strategy must account for the builder’s complete offer, including rate buydowns, closing-cost assistance, warranties and upgrades. Condition, location, lot, timing and realistic pricing become especially important.
### Does having equity guarantee that a seller will receive the price they want?
No. Equity is the difference between a property’s market value and the debt secured by it. Market value is determined by current buyer demand and competition—not by the owner’s desired proceeds.
### What should an owner do if the likely proceeds may not cover the mortgage and selling expenses?
Start early. Obtain a realistic market analysis and estimated net sheet, contact the mortgage servicer, and consult qualified legal, tax and financial professionals. A short sale or loan modification is not automatic and normally requires lender approval.
### Are profits from selling a primary residence always tax-free?
No. Federal law may allow qualifying homeowners to exclude part of the gain, but eligibility, ownership, occupancy and filing-status rules apply. Sellers should consult a qualified tax professional regarding their specific circumstances.
---
## Seller call to action
> **REIOS instruction:** Insert the permanent interactive **26 Seller CTA** here. Address first, Google address autocomplete, minimal wording, mobile responsive. Do not substitute a legacy seller card.
## Suggested CTA introduction
**Thinking about selling in the Wilmington area?** Start with a realistic look at your home’s current value, competing inventory and estimated equity—without pressure and without relying on an outdated peak-market number.
---
## Editorial safeguards and source links
- Local transaction patterns, seller conversations and builder-competition examples are presented as Buddy Blake’s firsthand market observations, not comprehensive MLS statistics.
- Do not state or imply that every Wilmington subdivision, price range or recently built home has declined in value.
- Keep the short-sale discussion educational; do not provide legal, tax, lending or foreclosure advice.
- Federal home-sale tax overview: [IRS Publication 523, Selling Your Home](
https://www.irs.gov/publications/p523)
- Mortgage rate lock-in background: [Freddie Mac, Mortgage Rate Lock-In and the Housing Market](
https://www.freddiemac.com/research/insight/mortgage-rate-lock-in)
- Featured episode: [Apple Podcasts](
https://podcasts.apple.com/us/podcast/the-brian-buffini-show/id1089027054?i=1000788531071)
## FAQ schema data for REIOS
1. **Question:** Why are fewer Wilmington homeowners selling voluntarily?
**Answer:** Many homeowners have low fixed mortgage rates they would have to surrender when they sell. Buying another home at today’s price and financing cost can make an optional move difficult to justify.
2. **Question:** Can a resale seller compete with a new-home builder?
**Answer:** Yes, but the strategy must account for the builder’s complete offer, including rate buydowns, closing-cost assistance, warranties and upgrades. Condition, location, lot, timing and realistic pricing become especially important.
3. **Question:** Does having equity guarantee that a seller will receive the price they want?
**Answer:** No. Equity is the difference between a property’s market value and the debt secured by it. Market value is determined by current buyer demand and competition, not by the owner’s desired proceeds.
4. **Question:** What should an owner do if the likely proceeds may not cover the mortgage and selling expenses?
**Answer:** Start early. Obtain a realistic market analysis and estimated net sheet, contact the mortgage servicer, and consult qualified legal, tax and financial professionals. A short sale or loan modification is not automatic and normally requires lender approval.
5. **Question:** Are profits from selling a primary residence always tax-free?
**Answer:** No. Federal law may allow qualifying homeowners to exclude part of the gain, but eligibility, ownership, occupancy and filing-status rules apply. Sellers should consult a qualified tax professional regarding their specific circumstances.
Additional material from the user:
Use the submitted article as the authoritative draft. Preserve Buddy Blake's first-person voice, factual safeguards, tax disclaimer, source links, FAQs, SEO fields, and title. For this article only, feature the official Apple Podcasts episode The Biggest Real Estate Opportunities Right Now from The Brian Buffini Show:
https://podcasts.apple.com/us/podcast/the-brian-buffini-show/id1089027054?i=1000788531071. Use the official compact player if supported; otherwise use an attributed episode card and Apple link, and never let the embed block publication. Generate our normal Buddy podcast separately using Buddy's actual ElevenLabs voice clone, with no spoken disclaimer. Generate the featured image with large bold white title text. Insert the permanent 26 Seller CTA at the bottom. Do not use any bridge.
Referenced URL Content (
https://podcasts.apple.com/us/podcast/the-brian-buffini-show/id1089027054?i=1000788531071):
Title: The Biggest Real Estate Opport… - The Brian Buffini Show - Apple Podcasts
September 8 The Biggest Real Estate Opportunities Right Now The Brian Buffini Show 49m Click here to watch on YouTube The housing market you’re waiting for isn’t coming back. For years, buyers, sellers and real estate professionals have been waiting for housing to return to “normal.” Brian Buffini says that’s the wrong way to look at what’s happening. In this episode of The Brian Buffini Show, Brian explains why the real estate market is still digesting the extraordinary conditions created during COVID—and why that process could continue for years. He breaks down the major demographic shifts reshaping housing, including the enormous influence of baby boomers, the rising age of first-time buyers, the growth of multigenerational households and the increasing importance of the Gen X “sandwich generation.” Brian also explains why he doesn’t expect either a massive housing crash or another COVID-style boom, what improving affordability could actually look like, and how real estate professionals can gain market share by adapting to the market that exists today instead of waiting for the old one to return. YOU WILL LEARN: • Why the real estate market is not returning to pre-COVID conditions. • How demographic shifts are creating new opportunities for buyers, sellers and agents. • Why success in today’s market requires patience, creativity and a focus on relationships. MENTIONED IN THIS EPISODE: Free Business Consultation NOTEWORTHY QUOTES FROM THIS EPISODE: “The real estate market is the anaconda that ate the meal called the COVID real estate market. And it will take years to digest.” – Brian Buffini “The market you have is the market you’re going to have.” – Brian Buffini “Affordability will improve over time. Inventory will release over time.” – Brian Buffini “It’s the people who build trust and who were there for people when the market was down. Those are the people who will benefit when the market goes back up.” – Brian Buffini “The first-time buyer has to be more disciplined, more long term and more creative.” – Brian Buffini Thebrianbuffinishow.com Episode Webpage Hosts & Guests Brian Buffini Host Information Show The Brian Buffini Show Frequency Updated Weekly Published September 8, 2026 at 8:30 PM UTC Length 49 min Season 3 Episode 25 Rating Clean To listen to explicit episodes, sign in. Sign In Stay up to date with this show Sign in or sign up to follow shows, save episodes, and get the latest updates. Sign In Select a country or region Africa, Middle East, and India See All Algeria Angola Armenia Azerbaijan Bahrain Benin Botswana Burkina Faso Cameroun Cape Verde Chad Côte d’Ivoire Congo, The Democratic Republic Of The Egypt Eswatini Gabon Gambia Ghana Guinea-Bissau India Iraq Israel Jordan Kenya Kuwait Lebanon Liberia Libya Madagascar Malawi Mali Mauritania Mauritius Morocco Mozambique Namibia Niger (English) Nigeria Oman Qatar Congo, Republic of Rwanda São Tomé and Príncipe Saudi Arabia Senegal Seychelles Sierra Leone South Africa Sri Lanka Tajikistan Tanzania, United Republic Of Tunisia Turkmenistan United Arab Emirates Uganda Yemen Zambia Zimbabwe Asia Pacific See All Afghanistan Australia Bhutan Brunei Darussalam Cambodia 中国大陆 Fiji 香港 Indonesia (English) 日本 Kazakhstan 대한민국 Kyrgyzstan Lao People's Democratic Republic 澳門 Malaysia (English) Maldives Micronesia, Federated States of Mongolia Myanmar Nauru Nepal New Zealand Pakistan Palau Papua New Guinea Philippines Singapore Solomon Islands 台灣 Thailand Tonga Turkmenistan Uzbekistan Vanuatu Vietnam Europe See All Albania Armenia Österreich Belarus Belgium Bosnia and Herzegovina Bulgaria Croatia Cyprus Czechia Denmark Estonia Finland France (Français) Georgia Deutschland Greece Hungary Iceland Ireland Italia Kosovo Latvia Lithuania Luxembourg (English) Malta Moldova, Republic Of Montenegro Nederland North Macedonia Norway Poland Portugal (Português) Romania Россия Serbia Slovakia Slovenia España Sverige Schweiz Türkiye (English) Ukraine United Kingdom Latin America and the Caribbean See All Anguilla Antigua and Barbuda Argentina (Español) Bahamas Barbados Belize Bermuda Bolivia (Español) Brasil Virgin Islands, British Cayman Islands Chile (Español) Colombia (Español) Costa Rica (Español) Dominica República Dominicana Ecuador (Español) El Salvador (Español) Grenada Guatemala (Español) Guyana Honduras (Español) Jamaica México Montserrat Nicaragua (Español) Panamá Paraguay (Español) Perú St. Kitts and Nevis Saint Lucia St. Vincent and The Grenadines Suriname Trinidad and Tobago Turks and Caicos Uruguay (English) Venezuela (Español) The United States and Canada See All Canada (English) Canada (Français) United States Estados Unidos (Español México) الولايات المتحدة США 美国 (简体中文) États-Unis (Français France) 미국 Estados Unidos (Português Brasil) Hoa Kỳ 美國 (繁體中文台灣)
Referenced URL Content (
https://www.irs.gov/publications/p523):
Title: Publication 523 (2025), Selling Your Home | Internal Revenue Service
Skip to main content Official websites use .gov A .gov website belongs to an official government organization in the United States. Secure .gov websites use HTTPS A lock ( ) or https:// means you've safely connected to the .gov website. Share sensitive information only on official, secure websites. English Español 中文 (简体) 中文 (繁體) 한국어 Русский Tiếng Việt Kreyòl ayisyen Search Menu Search Include Historical Content - Any - No Include Historical Content - Any - No Search File Overview INFORMATION FOR… Individuals Business and self-employed Charities and nonprofits International filers Retirement Governments and tax-exempt bonds Indian Tribal Governments FILING FOR INDIVIDUALS How to file When to file Where to file Update your information POPULAR Tax record (transcript) Apply for an Employer ID Number (EIN) Amend return Identity Protection PIN (IP PIN) Pay Overview PAY BY Bank Account (Direct Pay) Payment Plan (Installment Agreement) Electronic Federal Tax Payment System (EFTPS) POPULAR Your Online Account Tax Withholding Estimator Estimated Taxes Penalties Refunds Overview About refunds Direct deposit Reduced refunds Where’s my amended return? Credits & Deductions Overview INFORMATION FOR... Individuals Businesses & Self-Employed POPULAR Earned Income Credit (EITC) Child Tax Credit Clean Energy and Vehicle Credits Standard Deduction Retirement Plans Forms Overview POPULAR FORMS & INSTRUCTIONS Form 1040 Form 1040 Instructions Form W-9 Form 4506-T Form W-4 Form 941 Form W-2 Form 9465 POPULAR FOR TAX PROS Form 1040-X Form 2848 Form W-7 Circular 230 Report Fraud Overview Tax fraud and scams Identity theft Fake IRS email or message Tax return preparer Search Include Historical Content - Any - No Include Historical Content - Any - No Search Publication 523 - Introductory Material Future Developments What’s New Reminders Introduction Comments and suggestions. Getting answers to your tax questions. Getting tax forms, instructions, and publications. Ordering tax forms, instructions, and publications. Useful Items - You may want to see: Publication 523 - Main Contents Does Your Home Sale Qualify for the Exclusion of Gain? Transfer of your home to a spouse or an ex-spouse. Home’s date of sale. Sale of your main home. Eligibility Test Eligibility Step 1—Automatic Disqualification Determine whether any of the automatic disqualifications apply. Eligibility Step 2—Ownership Determine whether you meet the ownership requirement. Eligibility Step 3—Residence Determine whether you meet the residence requirement. If you were ever away from home, If you become physically or mentally unable to care for yourself, Eligibility Step 4—Look-Back Determine whether you meet the look-back requirement. Eligibility Step 5—Exceptions to the Eligibility Test Separated or divorced taxpayers. Surviving spouses. Service, Intelligence, and Peace Corps personnel. Qualified extended duty. Period of suspension. Vacant land next to home. Home destroyed or condemned—considerations for benefits. Remainder interest. Like-kind/1031 exchange. Eligibility Step 6—Final Determination of Eligibility Does Your Home Qualify for a Partial Exclusion of Gain? Work-Related Move Health-Related Move Unforeseeable Events Other Facts and Circumstances Figuring Gain or Loss Basis Adjustments—Details and Exceptions Fees and Closing Costs Construction. Costs owed by the seller that you paid. Improvements Repairs done as part of larger project. Examples of improvements you CAN’T include in your basis. Exception. Energy credits and subsidies. Home Acquired Through a Trade Traded for another home. Traded for other property. Home Foreclosed, Repossessed, or Abandoned Home Destroyed or Condemned Home Received in Divorce Home acquired after July 18, 1984. Home acquired on or before July 18, 1984. Home Received as a Gift Home Inherited Home acquired from a decedent who died before or after 2010. Surviving spouse. Community property. Inherited property in 2010. Property Used Partly for Business or Rental Calculation. Space within the living area. Space separate from the living area. Space formerly used as business or rental. Business or rental usage calculations. Business or Rental Use of Home Nonqualified use of entire property after 2008. Exceptions. How Much Is Taxable? Review of the Eligibility Test. Recapturing Depreciation Example. Tip: Reporting Your Home Sale What records to keep. Reporting Gain or Loss on Your Home Sale Determine whether you need to report the gain from your home. If you made separate gain/loss calculations for business and residence portions of your property, Determine any depreciation amounts you may need to recapture. Determine whether your home sale is an installment sale. Report any interest you receive from the buyer. If you’re a nonresident or resident alien who doesn’t have and isn’t eligible to get a SSN, Complete Form 8949, Sales and Other Dispositions of Capital Assets. Reporting recognized gain. Complete Schedule D (Form 1040), Capital Gains an
Referenced URL Content (
https://www.freddiemac.com/research/insight/mortgage-rate-lock-in):
Title: Mortgage Rate Lock-In and the Housing Market - Freddie Mac
Skip to main content FreddieMac.com Spotlight | July 24, 2023 Mortgage Rate Lock-In and the Housing Market Share The recent rapid increase in mortgage rates from historical lows to 20-year highs has created a scenario that we have not seen in more than 40 years. Because so many households have a fixed-rate mortgage, which exists in part because of financing from Freddie Mac and Fannie Mae, they were able to refinance into low interest rates in recent years. This contrasts with variable-rate mortgages, which have increased significantly as a result of rising mortgage rates. Nearly 6 out of 10 borrowers now have a mortgage rate at or below 4%. Given current market rates, many of those homeowners have locked in payment savings, but they also may have locked themselves into a forever home. Throughout this spotlight we use the term “mortgage rate lock-in effect” to refer to the ownership of a mortgage on favorable terms compared to current market interest rates. Nearly 6 out of 10 borrowers now have a mortgage rate at or below 4%. While those homeowners have locked in payment savings, they also may have locked themselves into a forever home. The mortgage rate lock-in effect is a benefit to homeowners with fixed-rate mortgages. To illustrate the benefit of the mortgage rate lock-in effect, suppose a lucky homeowner has refinanced their mortgage of $250,000 at 2.65% in January of 2021. Their current monthly principal and interest payment would be $1,007 and after 29 months of payment their current outstanding balance would be $236,379. If the borrower obtained a new 30-year mortgage of $236,379 at the prevailing market interest rate of 6.81%, their monthly payment would increase to over $1,500 a month. Following Quigley 1 , we compute the net present value of the mortgage rate lock-in effect by taking the difference between the outstanding balance of the mortgage and the present value of the mortgage at prevailing market interest rates. 2 The value of mortgage rate lock-in is $86,136 in our example. 3 Except for certain limited cases, the mortgage is not portable or assumable. In today’s market, most mortgages have due-on-sale clauses, requiring the borrower to terminate the mortgage when they sell the property. To enjoy the benefit of the value of their low mortgage rate, the borrower must continue to live there, maintain it as second home, let it sit vacant or rent it out. In our example, the homeowner is only going to be willing to sell their current home, and thus give up their low mortgage rate, if the net benefit of a move is worth at least $86,136. For some households who are pursuing a new job opportunity or moving to be closer to family the move could be worth it, but others may opt to stay put. The national average mortgage rate lock-in effect for 30-year and 15-year fixed rate loans is $55,000. For each 30-year and 15-year fixed rate loan in Freddie Mac’s portfolio active as of June 2023, we computed the value of the mortgage rate lock-in effect. 4 Per these calculations, the national average mortgage rate lock-in effect is $55,000 per household but because of differences in average loan sizes and the timing of originations and the history of refinance activity, the average value varies considerably across the country and by year of origination. Across geographies the average mortgage rate lock-in effect varies from a high of $91,000 in Hawaii to a low of $32,000 in West Virginia. Considering year of origination, the highest average values are for loans originated in 2020 and 2021 with average mortgage rate lock-in effect of $77,000 and $85,000, respectively. But, as rates continue to increase, even mortgages originated in 2023 have an average mortgage rate lock-in effect of $10,000. To get a sense of how significant the mortgage rate lock-in effect is for the U.S. economy, we can sum the mortgage rate lock-in effect over the Freddie Mac portfolio. Considering only 30-year and 15-year fixed-rate mortgages financed by Freddie Mac, the aggregate mortgage rate lock-in effect for borrowers in Freddie Mac’s portfolio is substantial. We estimate that, considering the company’s single-family mortgage portfolio, homeowners with fixed-rate mortgages financed by Freddie Mac have locked in savings of a collective $700 billion dollars in total value. This is equal to about 25% of the outstanding unpaid principal balances in Freddie Mac’s single-family mortgage portfolio. Our aggregate estimate of 25% of outstanding mortgage balances is significant and shows that many have truly benefitted from their fixed-rate mortgage when rates hit record lows. For comparison, Quigley calculated the average mortgage rate lock-in effect equal to $1,800 in 1981 for households with mortgages, which represented about 5% of outstanding mortgage balances versus about 25% today. 5 In Exhibit 4 we show a time series of quarterly average mortgage rate lock-in effect in the Freddie Mac portfolio since 2018. From March 2019 through December
