When will rising interest rates, low inventory and diminishing buyer hopes translate into falling home prices? Windermere Chief Economist Matthew Gardner crunches the numbers and looks at the possibilities of a correction.

The National Association of Realtors released its data on the U.S. housing market in August, and it contained a few things that I found interesting and wanted to share with you. 



As you can clearly see here, the number of homes for sale remains at close to historic lows. When adjusted for seasonality there were just 1.03 million single-family and condominium homes for sale in the month of August, and that’s down 8.3 percent from a year ago and the second lowest level in 2023.

When adjusted for seasonal variations, there were just over 911,000 single-family homes for sale in the month, that’s 15 percent lower than a year ago and 36 percent below August of 2019.

And the condominium market is not faring any better with just over 123,000 units available for purchase, listing activity was down year-over-year by just over 9 percent. 






And to give you a little different perspective, this chart shows you the total number of units for sale in the month of August going back more than 20 years and I think it gives a pretty good indication as to how tight the U.S. housing market really is. 

Now we’ve talked before about the reasons why supply is so limited, and the blame is almost totally attributable to mortgage rates with sellers remarkably reluctant to move because that would mean losing the historically low mortgage rate that they currently benefit from.

As the old saying goes, “You can’t buy what’s not for sale,” and this is certainly true in the housing market today. 



With such limited choice in the marketplace, it’s unsurprising to see home sales having plummeted following the pandemic-induced surge we saw in 2021. At an annual sales rate of 4.04 million units, that is only 40,000 more than the low seen this January and we are now holding at levels we haven’t seen since 2010.

Interestingly, single-family sales did see a little jump at the start of this year, but they have since pulled back — likely a function of rising financing costs which were getting close to 7 percent in June.

But the condominium market, while certainly down significantly, appears to be somewhat more resilient, and I find this interesting as we have not seen any palpable increase in listing activity for multifamily units. 



When prices started to fall in the summer of 2022, many expected to see them continue to plunge in a manner similar to that seen following the 2007 collapse, but that has certainly not been the case. Sale prices have rebounded and remain remarkably resilient — especially given significantly higher financing costs.

Although we did see a small drop in home prices between June and July of this year, U.S. home prices are only 1.6 percent below their 2022 peak; they’re up 3.9 percent year over year; and up by 11.1 percent from the start of 2023.

Single-family home prices paint a similar picture with prices down by 1.8 percent from peak, but up 3.7 percent year over year, and up 11.2 percent from the start of the year.

Interestingly sale prices in the Northeast were actually 3.5 percent higher in August than their 2022 peak.

And condominium prices are just 0.1 percent below the high seen in June of last year. Prices are now up 6.2 percent year over year and are 11.6 percent higher than we saw at the end of 2022.

Now of course the data shown here is unlikely to reflect the recent surge in mortgage rates so it will be interesting to see what impact that has not just on sales but sale prices when the September and October data is published.

My intuition suggests that — even with mortgage rates where they are today — as long as they don’t move significantly higher, prices at the national level are unlikely to collapse — but I do see sales volumes pulling back further as listing activity remains very constrained.



This chart shows a different way to look at the impact that mortgage rates are having on the market.

The dark blue line shows year-over-year home price growth, and the light blue line shows the 12-month change in average mortgage payments.

Although we did see that annual growth in mortgage payments fall to just 10 percent in June of this year — the first time we have seen that since 2021 — it has subsequently jumped back up and this means that a buyer of a median-priced house in the U.S. is faced with payments that are 26.5 percent higher than they were 12 months ago. At the same time, home price growth has stalled.

As I’ve mentioned in several past videos, I find it unlikely that inventory levels will increase significantly in 2023, and I also believe that supply will be constrained next year as well as rates remain at elevated levels. 

As we know, it is this lack of inventory that has helped to support home prices; however, there is a breaking point.

Ten-year bond yields are holding at multiyear highs and do not appear to be thinking of pulling back at any time soon — especially given new bond issuances that the country is going bring to market in order to address our burgeoning debt levels.

And it’s because of this that I now expect to see rates remaining higher for longer, and the question then becomes how much tolerance will buyers have if mortgage rates hold where they are today or what if they head closer to 8 percent?

Although I am not expecting this to happen, it is possible, and if it does, then sales will fall further, and the underpinning of price stability will certainly be eroded.

Matthew Gardner is the chief economist for Windermere Real Estate, the second-largest regional real estate company in the nation.

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription