All else being equal, raising mortgage interest rates has historically put downward pressure on home prices, as valuations accommodate any hit to demand from higher costs.

Over the past four years, however, all else has not been equal, and higher borrowing costs have failed to yield more substantial price declines.

An inventory shortage cushioning seller equity was broadly responsible for that phenomenon in recent years, according to a new analysis from Realtor.com. But active listings last month were 142.1% higher than January 2022, yet the national median list price was up 8.1% over that same period.

Jake Krimmel, a senior economist at Realtor.com, noted in the analysis that mortgage rate lock-in effects are the signature issue driving the “cognitive dissonance” between the growth in listings, which represents more options for buyers, but no national reset in prices.

“What we’ve learned is that the laws of supply and demand still apply, but the relationship has weakened,” said Krimmel. “Even a flood of listings and much higher financing costs weren’t enough to generate broad-based price relief.”

With more than half of outstanding first-lien mortgages carrying mortgage rates under 4%, exchanging a low-rate mortgage for one at current rates above 6% still means nearly doubling monthly payments for many households facing today’s higher asking list prices.

“Lock-in removed a lot of discretionary buyers from the market, leaving a lot of people moving out of necessity who were less price sensitive,” said Krimmel.

Average rates for 30-year fixed-rate mortgages are not expected to move much lower than 6% this year, meaning the lock-in effects slowing home sales in 2025 remain well-anchored in 2026.

Impacts of sellers delisting

The Realtor.com report also underscores how many sellers not under an urgent sales timeline would rather remove their listing than settle for a low offer. Record-high levels of home equity and low-rate mortgages mean sellers can wait for a better offer.

As a result, however, the analysis indicates that the share of newly listed homes among active listings has plummeted, removing supply that otherwise would put downward pressure on prices.

Delistings as a share of new listings rose to 32% in January, up from slightly over 8% in January 2022, to comprise 7% of all active listings nationwide last month.

“That combination gives sellers flexibility and the luxury to list, delist, repeat until they get their price,” said Kimmel, while noting that longer time on market does not necessarily translate to more favorable conditions for buyers.

Instead, the slower sales pace means whatever pricing reset may be in the pipeline will take longer to play out, because low turnover yields fewer opportunities for price discovery between buyers and sellers, “part and parcel of a market in sclerosis,” the report suggests.