The U.S. housing market faces headwinds from elevated mortgage rates and tight inventory, slowing sales while home prices remain elevated. Buyer demand persists but is constrained by affordability challenges, particularly for first-time buyers. sellers are adjusting strategies, emphasizing price reductions and incentives to attract buyers.

The current market dynamics stem from Federal Reserve interest rate hikes, which have increased borrowing costs significantly. As of mid-2023, the 30-year fixed mortgage rate averaged 7.08%, up from 3.1% in early 2022, according to the U.S. Census Bureau. This has reduced purchasing power, with the National Association of Realtors (NAR) reporting a 16% drop in existing home sales year-over-year in July 2023. Inventory levels remain low, with a 1.3-month supply of unsold homes—below the 6-month equilibrium. sellers are responding by lowering prices; the median sale price fell 2.5% in Q2 2023, per the Federal Housing Finance Agency. Additionally, remote work trends have shifted buyer preferences toward suburban and rural properties, driving up demand in those regions. The combination of high rates, limited supply, and shifting demographics underscores a challenging but stabilizing market.