Home prices rose substantially during the pandemic housing boom as historically low mortgage rates and remote work fueled demand. Then inflation crept up until it couldn’t be ignored, and the Federal Reserve raised interest rates. That in turn pushed mortgage rates up (which seem to have peaked at a more than two-decade high), and sales plummeted to an almost 30-year low. But home prices haven’t fallen, not meaningfully, and not broadly because nobody is selling their house. Basically, there are more buyers than sellers, and homes, so prices can’t fall.

“The reality is that about 70% of sellers are also buyers, so sellers are sensitive in this environment as well,” Zillow’s chief economist, Skylar Olsen, told CNBC toward the end of last week. 

Elevated mortgage rates are generally thought of as a challenge for homebuyers because of higher monthly payments. However, high mortgage rates also take a toll on sellers, or better said, would-be sellers, because of exactly what Olsen said: They’re mostly buyers, too. And no one wants to give up a 3% mortgage rate for one that’s more than double, so they don’t sell unless they absolutely have to. It’s called the lock-in effect, and it’s why we saw existing home sales plunge last year, and more recently, in March. 

In March, “the fastest appreciating markets were actually the most expensive; they were the California coastal markets,” Olsen said. “Why was that? Well, those are the places we also saw the most aggressive pullback … a continued pullback from existing owners not putting their homes on the market for sale.”

Olsen was referring to a recent analysis that found monthly home price increases were the most substantial in “coastal California metros” (and Seattle). It showed home prices rose more than 3% in San Jose, and more than, or roughly, 2% in San Francisco, San Diego, and Los Angeles. In the analysis, she said, “it’s not a coincidence” that those metropolitan areas are also “where the highest share of homeowners are likely locked into their mortgage rate,” referring to yet another analysis that found the only housing markets with fresh supply are those filled with baby boomers who are unbothered by higher mortgage rates. 

“Across the country, we still have this experience of not enough homes,” Olsen said. At the same time, “enough buyers are still willing to move forward … The typical home that when pending in March [sold] in only 13 days. Even at these prices, even at these mortgage rates.” 

So we don’t have enough homes (by one estimate, we’re missing anywhere between roughly 2 million and 7 million homes) or sellers—but there are enough buyers. That’s why home prices aren’t falling. But of course not every market is the same. Texas and Florida, “are areas where people aren’t as locked in … a larger share of the population are free and clear on their mortgage. They’re older boomers; they moved down there with equity growth over the past 15 years,” Olsen said. 

She continued: “These are the areas that we’re not as locked in; this is where we’re seeing a return of inventory, where we are seeing home prices falling. Home prices fell over the year in Austin … and are getting very, very soft in other major metros in Texas.” 

The average 30-year fixed mortgage rate is 7.44%, and it seems that as long as mortgage rates stay high, there won’t be enough homes or sellers to match buyers. And let’s not forget, there was already a housing crisis, and it has only gotten worse as people hold on to their homes and prices continue to rise.