Mortgage rates rose dramatically last year, impacting many people’s ability to buy a home and leading to headlines saying prices would crash. You might think higher rates would force sellers to lower prices to attract buyers, but there’s another factor at play – a lack of homes for sale. According to Lawrence Yun, Chief Economist at NAR, low inventory is offsetting the rise in interest rates: “We simply don’t have enough inventory. Will some markets see a price decline? Yes. [But] with the supply not being there, the repeat of a 30 percent price decline is highly, highly unlikely.”
This ongoing lack of inventory explains why many buyers still have little choice but to bid up prices. And it also indicates that the supply-and-demand equation simply won’t allow a price crash in the near future.
If more homes don’t come to the market, a lack of supply will keep prices from crashing. More inventory isn’t expected soon as homebuilders are struggling to meet the demand.