In a clash of opposing forces, the U.S. housing market finds itself embroiled in a fierce battle. On one side, deteriorated affordability resulting from a spike in mortgage rates from 3% to over 6% in 2022, just after national home prices surged by more than 40% during the Pandemic Housing Boom, is exerting downward pressure on home prices. On the other side, the scarcity of existing inventory, exacerbated by the so-called "lock-in effect," as many homeowners are reluctant to sell and buy anew, fearing the trade-off from a 2% or 3% mortgage rate to one in the 6% to 7% range, is exerting upward pressure on home prices.
Housing economists say neither force should be ignored.
