Michael Miedler, President and CEO of Century 21 Real Estate, said high interest rates are weighing on the housing market.
The current economic environment is critical because mortgage costs directly dictate buyer demand. When rates rise, the barrier to entry for new homeowners increases, shifting the balance of power from sellers to buyers.
Miedler said housing is one of the most rate-sensitive industries. He said that higher mortgage rates reduce the number of active buyers, which in turn leads to rising inventory as homes stay on the market longer.
This shift has forced a change in pricing strategies across the U.S. market. Data shows that 42% of homes are taking price cuts [1]. Despite these reductions, many potential buyers remain on the sidelines due to the cost of borrowing.
Affordability remains a primary hurdle for first-time buyers. The challenge is compounded by a phenomenon where current homeowners are reluctant to sell. Many of these homeowners are locked into pandemic-era loans with mortgage rates between two% and three% [2].
Because these homeowners would face significantly higher monthly payments if they moved, they are staying in their current properties. This creates a stagnant environment where the available inventory consists largely of homes that must be sold for reasons other than voluntary upgrading.
Miedler said these combined factors—high rates, limited mobility for current owners, and pricing volatility—continue to pressure the real estate sector. The industry remains dependent on the trajectory of interest rates to restore a more fluid market for both buyers and sellers.
“Housing is one of the most rate-sensitive industries.”
The housing market is experiencing a 'lock-in effect' where the gap between pandemic-era mortgage rates and current rates prevents homeowners from selling. This restricts the supply of existing homes, forcing a reliance on new construction or distressed sales, while simultaneously pricing out first-time buyers who cannot afford current mortgage terms.
