If you've been waiting for home prices to drop the way a "correction" is supposed to work, here's the honest answer for why that hasn't happened. Economists have tracked real estate cycles for about 150 years — recovery, expansion, oversupply, correction — and by the numbers, we've technically been sitting in the correction phase for four years now. But there's a piece missing from the textbook version: home prices haven't actually dropped nationally. Asking prices and inflation-adjusted values have softened a bit over the past year, but nothing close to what a typical correction looks like.
The reason comes down to those ultra-low pandemic-era mortgage rates. A huge number of homeowners locked in rates around 3%, and a lot of existing owners refinanced down to similar levels. Now, with rates roughly double that, those same homeowners simply don't want to give up their rate to sell — so instead of lowering their price to attract a buyer, many are just staying put. That's created a standoff: low supply of homes for sale, and lower demand from buyers who are priced out. Not a crash, just a stalemate.
Interestingly, this isn't the first time we've seen this exact pattern. Back in the early 1980s, mortgage rates spiked to over 18%, and something similar happened — sales dried up, but prices didn't fall much, because homeowners had no real financial pressure to sell. History suggests today's market is absorbing the shock through fewer transactions rather than falling prices, largely because most current homeowners have real equity and a fixed-rate mortgage protecting them.
So what actually gets us out of this phase? It's not as complicated as it sounds — but it is slow. Mortgage rates don't need to crash, they just need to stabilize enough for buyers, sellers, and builders to plan with some confidence. From there, time, income growth, and a more balanced supply of homes do the rest of the work. Job market stability matters too, since a lot of the moves that drive real estate — new jobs, relocations, growing families — tend to slow down when hiring and layoffs both go quiet.
If any of this has you wondering what it actually means for your specific situation, give me a call. No pressure, just a real conversation about your numbers.
