Defying Expectations: Why Home Prices May Rise Despite Current Mortgage Rates

Defying Expectations: Why Home Prices Continue to Rise Despite Rising Mortgage Rates

Despite current mortgage rates, home prices in the USA have continued to climb at an unprecedented pace in many locations. This trend has defied expectations and left many experts scratching their heads. In this blog post, we will explore the reasons behind this phenomenon, drawing upon insights from experts and relevant statistics.

The Supply-Demand Imbalance

One of the primary factors driving up home prices is the persistent imbalance between supply and demand. The supply of homes for sale has been consistently lower than the demand, creating a situation where buyers are competing fiercely for a limited number of properties. This competition has resulted in bidding wars, driving up prices to record levels.

According to the National Association of Realtors (NAR), the median existing-home price in the USA was $428,700 in July 2023, up 10.8% from the same period in 2022. This represents the 127th consecutive month of price increases.

Low Inventory Levels

A major contributor to the supply-demand imbalance is the low level of homes available for sale. In July 2023, there were only 1.26 million homes for sale, representing a 2.6-month supply at the current sales pace. This is significantly lower than the six-month supply that is considered to be a balanced market.

The lack of available inventory can be attributed to several factors, including:

  • Sellers’ reluctance to list their homes due to fears of missing out on potential appreciation
  • The aging housing stock, which means that many homes are not in good condition and require significant repairs or upgrades
  • Construction bottlenecks caused by labor shortages and supply chain disruptions

Strong Demand from Millennial Buyers

Millennials, the generation born between 1981 and 1996, are now the largest generation of homebuyers. This cohort is entering the prime homebuying age and is fueling demand for homes.

Millennials are attracted to homeownership for several reasons, including:

  • A desire for financial stability and security
  • The belief that owning a home is a good investment
  • The preference for single-family homes over apartments

Where Prices Are Still Rising

While rising mortgage rates have impacted some areas of the country more than others, home prices are still rising in many parts of the USA. According to the S&P CoreLogic Case-Shiller Index, home prices rose in 19 of the 20 largest US cities in July 2023. The median price for a single-family home in the US rose 1.9% from June 2023 to July 2023, and is up 13.4% year-over-year.

Where Prices Are Falling

Despite the overall upward trend, there have been some pockets of weakness in the housing market. Some of the areas that have seen the most significant price declines are:

  • Seattle: Home prices in Seattle have fallen 7.5% from their peak in May 2022.
  • San Francisco: Home prices in San Francisco have fallen 7.2% from their peak in January 2023.
  • Portland, Oregon: Home prices in Portland have fallen 5.9% from their peak in September 2022.

Sales Data by Property Type

Sales data also varies by property type. Single-family home sales have been strong in recent months, while condominium sales have been more sluggish. According to the National Association of Realtors (NAR), the median sales price for a single-family home in the US was $453,900 in July 2023, up 11.9% year-over-year. The median sales price for a condominium was $293,800 in July 2023, up 10.4% year-over-year.

Expert Insights

To gain a deeper understanding of the dynamics driving up home prices, here’s what several experts in the real estate industry have to say:

“The main reason why home prices are still rising despite rising mortgage rates is the simple fact that there are not enough homes for sale to meet the demand from buyers.”

Lawrence Yun, Chief Economist at the National Association of Realtors

“Millennials are a major force driving up home demand. They are the largest generation of homebuyers, and they are entering the prime homebuying age.”

Danielle Hale, Chief Economist at RE/MAX

“The low level of inventory is a major challenge for the housing market. We need to see more homes built to meet the needs of buyers.”

Odeta Kushi, Deputy Chief Economist at Freddie Mac

Outlook for the Near Future

Overall, the housing market is facing quite a few challenges. However, the strong demand from buyers and the limited supply of homes for sale suggest that home prices are likely to continue to rise in the near term and the market will remain very competitive.

How to Gain a Competitive Edge Over Other Buyers

Embrace Home Loans® “Win the Bid” program goes above and beyond traditional pre-approvals, offering borrowers a unique advantage in the competitive bidding process. This program provides an “Approved to Close Backup Cash Guarantee,” which gives you the flexibility to waive the financing and appraisal contingencies in your offer, making it even stronger:

  • Your offer will exceed even cash offers
  • You can choose to waive the financing and appraisal contingencies, making your offer even stronger
  • Increased confidence in your offer
  • Seller doesn’t have to worry about the sale falling through because they have a backup cash guarantee**
  • If the guarantee is triggered, the seller can choose to walk away with $10,000 or have Embrace buy the home for the contract price
  • We’re so confident that your financing will come through that if the guarantee is triggered despite your reasonable efforts to obtain financing from us,*** Embrace will reimburse up to $25,000 of your earnest money deposit forfeited to seller as a result of your inability to obtain financing from us.

If you’re serious about buying a home in today’s competitive market, contact your local Embrace Home Loans office today to learn more about this exceptional program.


  • National Association of Realtors:
  • RE/MAX:
  • Freddie Mac:
  • S&P CoreLogic Case-Shiller Index:
  • National Association of Realtors (NAR):
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