Rates have been in the sixes for two years now and prices still haven't dropped. Here's what's actually happening in the market and why it's likely to stay that way.

When will home prices finally come down? We hear this question a lot from people in our community, and it makes sense why so many are asking.

Interest rates have been up in the sixes for the last couple of years now. And when there's a fast, significant spike like that, people naturally expect the opposite effect on pricing. Rates go up, so prices should come down, right? A lot of people have been waiting for that cause and effect to kick in.

Here's what's actually happening in the market and why you're not seeing prices drop.

Higher rates slowed demand, but they didn't stop it. When rates went up, buyer demand definitely cooled. But it didn't disappear. There are still buyers actively looking and competing for homes. The pace is different than it was during the peak, but the demand is still there.

“Higher rates slowed demand, but they didn't stop it. And with so many homeowners locked in at low rates, inventory is staying tight. That's why prices aren't dropping.”

The bigger factor is inventory, and it's still tight. If you remember the COVID market, prices were skyrocketing because inventory was extremely tight and demand was high. Today, demand is a little softer, but inventory is still low for a different reason. So many homeowners locked in at 3% or 4% interest rates when they purchased. Now, as potential sellers, they're asking themselves whether they really need to move and whether it's worth giving up that rate. That hesitation is keeping fewer sellers from coming to market, which is keeping inventory lower than it would otherwise be.

Real estate is all about supply and demand. When you combine slightly softer buyer demand with tight inventory, the market stays stable. Buyers are more cautious and have higher expectations around affordability. Sellers are becoming more realistic on pricing. But with fewer homes coming to market, the balance holds. And when the market is stable, you don't see prices drop.

Different price points are telling different stories. This is something a lot of people don't realize. Right now in the Twin Cities, some price points are in a buyer's market while others are still in a strong seller's market with multiple offers. Where your home falls on that spectrum depends on your specific price point, neighborhood, and property type. It's not a one-size-fits-all market.

If you're thinking about making a move in the next year or two and you're curious whether your home purchase or sale falls in a buyer's market, a seller's market, or somewhere in between, reach out to us for a complimentary strategy session. We'll walk you through the pricing trends for the price range you're looking at and for your current property so you're an informed consumer who knows exactly what the market is doing.

Call us at (651) 998-9829, email us at info@holzgroup.com, or visit holzlifestylehomes.com. We'd love to help you understand where you stand.