Conference Agenda
Please note that all times are shown in the time zone of the conference. The current conference time is: 15th Sept 2026, 08:44:01am CEST
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Daily Overview |
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RE 03: Commercial Real Estate Location: LR M2.3 (Floor 2) Session Chair: Sven Damen, University of Antwerp | |
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ID: 624
Does Mortgage Rate Lock-in Dampen Commercial Real Estate Busts? 1: Cornell University, United States of America; 2: Federal Reserve Board, United States of America; 3: Cornell University, United States of America We show that mortgage lock-in effects play a significant role in commercial real estate. We develop a bargaining model in which owners with low interest rates have high reservation values and thus sell at higher prices. Consistent with the model, we find a 17% reduction in sale probability and a 4% increase in price for locked-in properties when market rates are 100bp above the fixed rate on the mortgage. Additionally, unlocked properties in more locked-in markets sell at higher prices, consistent with a market-wide effect. Overall, our results indicate that lock-in effects mitigated price declines significantly in the recent bust.
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