Every year for the last 5 I've thought "this must surely be the top of the market, I'll wait".. And every year they went up. Now interest rates have gone up too, to add insult to injury. Just going to leave for greener pastures, I think.
Home prices tend to decrease when interest rates go up so that monthly payments aren't that different. Unfortunately, there's a lag between rates increasing and sellers realizing their potential buyers can afford less.
Prices are affected by demand and supply. Supply can be constrained enough (through zoning, less construction) to still be less than demand in a high interest rate environment.
Demand is also an interesting one, the population continues to increase and every year a new, larger, cohort of people enter the housing market. Many are seeking to live in the relatively few areas that have strong, dynamic labor markets, and are willing to pay a higher share of income to achieve this.
A lot of housing markets have experienced this effect on both supply and demand and prices have not decreased in line with what the basic models predicted.
