The Real Reason the Housing Market Isn’t Crashing Yet
Capital Personal – It’s a question that’s been lingering in the minds of economists, investors, and anxious homeowners alike: why isn’t the housing market crashing yet? After months of economic tightening, interest rate hikes, rising inflation, and waves of layoffs across major sectors, logic suggests that the housing market should have buckled under pressure. And yet, despite all odds, it hasn’t. In fact, in many areas, prices are holding strong or even rising.
So, what’s really going on behind the scenes? The answer is more complex and surprising than most people think.
One of the most powerful forces propping up the housing market right now is a simple case of supply and demand. After the pandemic-induced construction slowdown and years of underbuilding, the United States (and many other countries) continue to face a housing shortage. There simply aren’t enough homes to meet the demand.
While high mortgage rates have made buying less affordable for many, they’ve also discouraged current homeowners from selling. Most existing homeowners are “locked in” with ultra-low interest rates from the 2020–2021 era. Why would someone trade a 2.5 percent rate for a 7.0 percent one just to move? That reluctance is leading to an inventory crisis fewer listings, fewer options, and continued competition for what’s available.
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Rising interest rates have drastically changed the homebuying equation. While this typically cools demand and it has to some extent—it’s also frozen the supply side. Most sellers are also buyers, and the prospect of doubling their mortgage payment has made them choose to stay put.
This creates a feedback loop: high rates slow demand, but they also choke off inventory. And that lack of inventory supports prices. It’s a delicate standoff buyers are hesitant to overpay with high rates, and sellers don’t want to give up their low payments unless absolutely necessary. That standoff is keeping prices relatively steady, or even pushing them up in some high-demand cities.
Another factor many overlook when asking why isn’t the housing market crashing yet is the role of institutional investors. Companies like BlackRock, Invitation Homes, and other private equity giants are buying single-family homes at scale, especially in Sun Belt cities.
These purchases don’t show up like traditional home sales. They’re often cash offers, off-market, and done in bulk. These investors see residential real estate as a stable asset class, particularly in an era of inflation. And while they may not be responsible for the majority of transactions, their activity puts a floor under the market. When they buy 200 homes in a city, they take that supply off the market making competition even tougher for regular homebuyers.
Another underrated reason why the housing market isn’t crashing is the rental market. In many metro areas, monthly rents are still rising or holding strong, making homeownership a more appealing long-term investment despite higher borrowing costs.
In some cities, it’s now cheaper to buy a home (even with a higher mortgage rate) than it is to rent a comparable property. For families planning to stay in one place for five or more years, buying still makes sense. This calculation fuels ongoing demand, particularly among millennials starting families.
Although buyer sentiment has cooled since the frenzy of 2021, a subtle form of fear of missing out is returning. Many potential buyers believe that if they wait too long, prices might rebound further, or interest rates might rise even more. This “buy now before it’s worse” mentality is helping to prop up demand, even in a cooling economy.
And in some areas, bidding wars are returning not with 20 offers, but with 2 or 3. That’s enough to keep prices from falling.
Governments have also played a significant role in preventing a crash. Unlike in 2008, today’s mortgage holders are highly qualified. Stringent post-2008 lending standards mean that homeowners today are far less likely to default en masse.
Additionally, policies such as mortgage forbearance during the pandemic and federal programs to encourage first-time homeownership have kept distressed inventory at bay. Without a wave of foreclosures flooding the market, the supply side remains tight, and price drops remain minimal.
Understanding why isn’t the housing market crashing yet helps both potential buyers and sellers make better decisions. For buyers, it means the dream of scooping up a home at a steep discount may not materialize at least not soon. Instead, the current market requires strategic buying: picking the right location, timing your purchase, and exploring rate buy-downs or adjustable-rate mortgages.
For sellers, it’s a reminder that now may not be a bad time to list if you have a compelling reason to move. With less competition and stable demand, well-priced homes in desirable areas still attract strong offers.
