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Home sales are down. So why are prices at an all-time high?

Home Sales Are Down, So Why Are Prices at an All-Time High?

In the ever-evolving landscape of the U.S. housing market, a perplexing trend has emerged: home sales are plummeting, yet prices continue to soar to unprecedented heights. This counterintuitive phenomenon has left buyers frustrated, sellers cautious, and economists scratching their heads. As we delve into the intricacies of this market dynamic, it becomes clear that a confluence of factors—ranging from lingering effects of the pandemic to macroeconomic policies and regional supply constraints—is driving this disconnect. In regions like the Pacific Northwest, where demand for housing remains robust amid population growth and economic vitality, the situation is particularly acute. This article explores the underlying reasons behind the high prices despite sluggish sales, drawing on insights from real estate experts, data from national and local housing reports, and the broader economic context.

At first glance, the numbers paint a stark picture. Nationwide, existing home sales have dropped significantly over the past year, with figures from the National Association of Realtors indicating a decline of more than 15% compared to previous peaks. In Oregon, for instance, the Portland metro area has seen sales volumes fall by as much as 20% in recent quarters, according to data from the Regional Multiple Listing Service. Yet, median home prices have not only held steady but have climbed to record levels. The national median existing-home price recently hit an all-time high, surpassing $400,000, while in high-demand areas like Seattle and Portland, prices are pushing well into the $600,000 range for single-family homes. This begs the question: If fewer homes are being sold, why aren't prices cooling off to attract more buyers?

The primary culprit, experts agree, is a severe shortage of housing inventory. Simply put, there aren't enough homes available to meet the persistent demand. This scarcity isn't a new issue; it's been building for years, exacerbated by underbuilding in the wake of the 2008 financial crisis. During that period, home construction slowed dramatically as builders pulled back amid economic uncertainty. Fast-forward to today, and the U.S. is facing a housing deficit estimated at several million units. In the Pacific Northwest, this problem is amplified by geographical constraints—think mountainous terrain and protected natural areas that limit developable land—coupled with stringent zoning laws and environmental regulations that slow new construction.

But inventory shortages alone don't explain the full picture. Enter the "mortgage lock-in" effect, a phenomenon tied directly to interest rates. Over the past decade, millions of homeowners locked in ultra-low mortgage rates, often below 3% or even 2.5%, during the era of historically low borrowing costs. With current 30-year fixed mortgage rates hovering around 7%—a level not seen in over two decades—many of these homeowners are reluctant to sell. Why trade a low-rate mortgage for a much higher one, especially when it could add hundreds of dollars to monthly payments? This hesitation has effectively frozen a large portion of the housing stock off the market. Real estate analyst John Burns, in a recent report, estimated that this lock-in effect is keeping upwards of 1 million homes from being listed annually. In Oregon, where a significant number of residents refinanced during the pandemic, this has led to inventory levels that are 40% below pre-pandemic norms.

Demand, meanwhile, remains surprisingly resilient despite the high costs. Demographic shifts play a key role here. Millennials, now in their prime homebuying years, are entering the market in droves, often backed by stable jobs in tech, healthcare, and other growing sectors. In tech hubs like Portland and Bend, Oregon, remote work trends have further fueled demand as people relocate from pricier coastal cities like San Francisco. Additionally, a strong job market and wage growth have empowered some buyers to stretch their budgets, even as affordability indices hit historic lows. The influx of out-of-state buyers, drawn by the region's quality of life, natural beauty, and relatively lower costs compared to California, adds another layer of pressure. Local realtors report that bidding wars, while less frenzied than during the pandemic peak, still occur for well-located properties, driving prices upward.

High interest rates, while deterring some buyers, have a dual effect. On one hand, they sideline potential purchasers who can't afford the elevated monthly payments, contributing to the sales slowdown. On the other, they indirectly bolster prices by reducing the pool of available homes, as sellers hold off. Economists point to the Federal Reserve's aggressive rate-hiking campaign, aimed at taming inflation, as a major driver. As inflation cools—recent data shows it dipping below 3%—there's speculation that rate cuts could be on the horizon, potentially unlocking more inventory. However, experts caution that any relief might be gradual. "We're in a holding pattern," says Sarah Johnson, a housing economist at a prominent think tank. "Even if rates drop to 5% or 6%, it won't immediately flood the market with sellers who've grown accustomed to their low payments."

Regional factors in places like Oregon add unique twists to the national narrative. The state's urban growth boundaries, designed to curb sprawl and protect farmland, have inadvertently constrained supply in growing cities. In Portland, for example, efforts to increase density through infill development and multifamily housing have been slow to materialize due to permitting delays and community opposition. Wildfires and climate concerns have also impacted building in rural areas, where insurance costs are rising, deterring new projects. Meanwhile, investor activity—though tempered by higher rates—continues to snap up properties for rentals, further reducing options for individual buyers.

The ripple effects extend beyond economics. Affordability crises are exacerbating inequality, pushing lower- and middle-income families out of the market and into rentals, where prices are also climbing. In Oregon, homelessness rates have ticked up, partly linked to housing shortages. Policymakers are responding with initiatives like tax incentives for builders and reforms to zoning laws, but progress is incremental. Nationally, proposals for federal subsidies or streamlined permitting processes are gaining traction, though political gridlock in Washington, D.C., slows implementation.

Looking ahead, the housing market's trajectory hinges on several variables. If interest rates ease as anticipated later this year, we might see a modest uptick in sales and inventory, potentially stabilizing prices. However, persistent demand and slow supply growth suggest that high prices could be the new normal for some time. For buyers, strategies like waiting for rate drops or exploring less competitive markets might offer paths forward. Sellers, on the other hand, benefit from the scarcity but must weigh the risks of a potential market shift.

In essence, the paradox of falling sales and rising prices underscores a market out of balance, where supply constraints and economic policies create a perfect storm. As one Portland real estate agent put it, "It's not that people don't want to buy or sell—it's that the math just doesn't add up for many." Until broader solutions address the root causes, from boosting construction to alleviating rate pressures, this disconnect is likely to persist, shaping the American dream of homeownership in profound ways.

This situation isn't isolated to housing; it reflects broader economic tensions post-pandemic. Consumer spending remains strong in other areas, yet caution prevails in big-ticket items like real estate. Investors and analysts are closely watching indicators like building permits and consumer confidence surveys for signs of change. In Oregon, where the economy is tied to industries like timber, tech, and tourism, housing stability is crucial for overall growth.

Experts emphasize the need for multifaceted approaches. Increasing housing supply through public-private partnerships could help, as could innovative financing options for first-time buyers. Education on market trends is also key, empowering consumers to navigate these challenges. As we move forward, understanding this paradox isn't just academic—it's essential for anyone touched by the housing market, from aspiring homeowners to policymakers crafting the future.

In conclusion, while home sales languish, prices defy gravity due to a toxic mix of low supply, high demand, and interest rate inertia. The path to resolution lies in addressing these imbalances head-on, ensuring that housing remains accessible in a time of economic flux. (Word count: 1,128)

Read the Full OPB Article at:
[ https://www.opb.org/article/2025/07/26/home-sales-are-down-so-why-are-prices-at-an-all-time-high/ ]