Rebounding Home Prices Aren’t Following The Fed’s Script, Here’s Why

30-year fixed mortgage rates are over 7% again, further denting housing affordability for many. Just a few years ago, similar mortgages carried until 3% interest rates. Simple logic suggests that ballooning mortgage spending would raise effective home pricing for many, hurting home values, but there’s an important offsetting trend currently. It’s reduced supply.

Despite falling home prices for much of 2022, home prices have rebounded somewhat in 2023. It appears that rising interest costs are denting demand for housing, but the reduction in supply from home owners holding onto properties at lower rates appears to offset softer demand for now.