Waiting for Home Prices to Drop? Don’t Count on It.

Some hopeful deed holders have waited a long time for property values to fall. Home prices remain high. Interest rates, too.

It’s a time of war and simmering inflation. Generally, mortgage rates go up when inflation goes up—and when our federal treasury prints money. Which it’s doing now.

As inflation rises, so do borrowing rates. After sliding down to 5.99% in early 2026, the average 30-year mortgage rate is now well above the 6-percent mark. And you’d be hard-pressed to find any analyst who expects interest rates to drop back down to 6% any time soon.

All things considered, now may be the hardest time to be a hopeful home buyer in living memory.

So, why hasn’t the housing market crashed yet? Will it ever come down to Earth just enough so sidelined people finally get an entry point?

No Perfect Entry Now. But Shying Away Is Taking a Risk, Too.

Redfin says hopeful buyers are, to put it mildly, having second thoughts about this economy. They pulled out of home purchase contracts in droves last month. Are they right? Is this the wrong time to become a deed holder?

Granted, says Certified Public Accountant Brian Kim, the U.S. housing market is in “a very strange place.”

Mortgages are high-priced and so is real estate. Shouldn’t this be pressing demand way down? Well, this is the strange part. It’s not really pushing home prices down. Home prices keep staying high because:

• Inventory is tight. Especially with mortgage rates spiking over the last few weeks, it’s harder to find owners willing to let go of their current loans and sell. It’s called the “lock-in effect.” Most current deed holders are enjoying a sub-5% interest rate on their mortgage accounts. They’re sitting pretty. They hesitate to give up their attractive rates by selling their homes.

• Demand hasn’t stopped. While the “silver tide” of boomer sellers is a real thing, older and wealthier people are still buying real estate. They’re equipped to handle a market like this.

Kim says the conflict between the White House and Iran is pushing both inflation and mortgage interest rates back up—just after rates started to settle back down below 6% in February. According to the BiggerPockets Investor Pulse, nine straight months of affordability gains have now been completely wiped out by war.

It’s a setback for first-time deed seekers. There are far more of them than there are homes available with reasonable price tags.

The “New Homeowner Penalty” Is a Thing. But Should It Hold Hopeful Deed Holders Back?

At the present time, first-time buyers are disadvantaged by the “new homeowner penalty,” Kim notes, citing an article in the Business Insider. First-timers lack the built-up equity that earlier buyers have. Also, earlier buyers have had a chance to refinance when mortgage rates were under 5%. Typical deed holders now spend about a fifth of their household income on housing. But a first-timer will, on average, spend 26% of income on housing.

Yet those who can buy might like to do so, because staying out of this market is also a risk. The housing market doesn’t look poised to get any easier later.

Renters understandably look at this market with hesitation. Yet the same factors that make the market daunting, also create an opportunity.

Buyers who take the plunge will need both discipline and nerve. And the path ahead will take courage. Today, the average deed holder pays more than $2K monthly to their mortgage company.

The housing situation is concerning from most any angle. It has to be said. But that’s also why so many potential buyers will sit this market out. As buyers back off, competition eases. When sellers have to wait longer, they’re more likely to make better deals for buyers.

Read more about what could help with the U.S. housing affordability challenge right now.

“A Major Collapse Is Unlikely, Unless Something Breaks.”

Of course, the future is always uncertain. A recession could send property values downward. While sidelined buyers might find that thought appealing, it would involve a rash of foreclosures and that economic state is not good for anyone.

Another, related situation that could lead to a drooping market? The unlikely event of a plunge in interest rates. As noted above, people who got low-interest mortgages a few years back don’t want to give up their comfortable financing. This has caused a lull in listings. An interest rate drop would let those borrowers stop clinging to their current loans, and start selling.

But continued high interest rates could also lower prices. If rates go up and stay up, demand will fizzle.

We’re likely to face what Brian Kim calls “slow, boring normalization—not a crash, not a boom, but a grind.”

It’s important for potential buyers to know that the fundamentals of this market protect deed holders against a housing crash. A crash isn’t likely given the tight inventory, and the high overall equity deed holders have. “While prices could stagnate, a major collapse is unlikely, unless something breaks.”

So that’s where we are. A flat housing market is not a bad entry point to start building home equity. This is why investment companies buy up homes these days. Big companies are a growing presence in real estate. Many of these companies count on people to rent from them, of course. They’re banking on the idea that most renters have: that many ordinary people will never find a way to buy a home.

And as Sarah DeFlorio at William Raveis Mortgage told Realtor.com: “Those without…resources are sadly being left behind and stuck in a rental cycle.”

Risks Ahead? Your Deed Is Your Treasure Chest.

We’d much rather see deeds in the hands of hard-working people than on the balance sheets of investment firms.

While we are not your accountant, and we are not your financial adviser, we do root for you, brave deed seeker. If, as expected, we see a 1% – 3% rise in home values annually, and inventory gradually rises, then those who acquire deeds will have their properties as treasure chests, ready to support them if and when the economy gets even rougher.

As always, we urge you to consult your own accountant or financial adviser for personalized guidance.