10/13/2026
If mortgage rates are rising and buyers can afford less, why aren’t home prices falling?
In theory, higher interest rates should put downward pressure on home prices. As borrowing becomes more expensive, purchasing power declines, fewer buyers qualify, and sellers should eventually have to adjust their expectations.
But the housing market hasn’t responded quite that simply.
According to Freddie Mac, the average 30-year fixed mortgage rate reached 7.40% last week, up from 6.30% a year earlier.
Meanwhile, the National Association of Realtors just reported that the median existing-home sale price reached $417,500 in September, a 1.3% increase year over year.
Home sales are down 2.2% from last year, yet prices continue to rise.
So what’s keeping prices elevated?
I think a major factor is the mortgage rate lock-in effect. Homeowners who secured mortgages around 3% have little incentive to sell and take on a new mortgage at more than double that rate.
This limits the number of existing homes coming onto the market, even as higher rates discourage potential buyers.
We’re starting to see that balance shift, though. Housing inventory increased 4.6% year over year in September, reaching 1.60 million homes, or approximately 4.8 months of supply.
That gives buyers more negotiating power, but it doesn’t necessarily mean prices will fall across the board.
Housing is ultimately a local market. Areas with strong employment and limited inventory can continue supporting higher prices, while markets with more available homes may experience price reductions.
To me, the bigger issue is affordability. Even if home prices remain relatively flat, higher borrowing costs can make the monthly payment substantially more expensive.
I’m interested to see whether growing inventory eventually puts more meaningful downward pressure on prices, or if homeowners continue holding onto their low-rate mortgages.
What do you think will give first: home prices or mortgage rates?
Sources: Freddie Mac, October 8, 2026 | National Association of Realtors, October 13, 2026
