Mortgage rates have climbed above 7%, yet home prices remain near record highs. The usual forces of supply and demand are not behaving as expected. Sellers are refusing to lower their asking prices.
Many homeowners locked in low mortgage rates during the pandemic. Moving now would mean trading a 3% loan for one above 7%. That financial gap keeps potential sellers on the sidelines.
The result is a historically low number of homes for sale. Buyers face fierce competition for a limited pool of properties. Scarcity continues to push prices upward, even as borrowing costs rise.
New listings have dropped sharply compared to last year. Inventory remains far below pre-pandemic levels. This imbalance gives sellers unusual leverage in most markets.
Buyers are stretched thin by higher monthly payments. Some have paused their search entirely. Others continue to bid, fearing prices will only climb further.
Economists expected higher rates to cool the market. That has not happened on a broad scale. Price growth has slowed in some regions but has not reversed.
If sellers eventually capitulate, prices could fall. Until then, stubborn owners remain the main support for current valuations. The standoff between buyers and sellers shows no sign of breaking.
