Housing Market Update: More Inventory, Higher Rates, and a Market That’s Splitting in Two

If you’ve been trying to follow the housing market lately, you’ve probably noticed something strange: one headline says buyers finally have leverage again, while another says homes are still selling above asking price in a matter of days.

The truth is, both are happening.

Across much of the country, inventory is improving and buyers finally have more choices than they’ve had in years. But at the same time, mortgage rates are climbing again, affordability remains stretched, and the homes that are truly move-in ready are still attracting strong competition.

That’s creating a housing market that feels very different depending on where you live, what price range you’re shopping in, and the condition of the home itself.

Orange County: Turnkey Homes Are Still Moving Fast

According to Steven Thomas, the Orange County, CA market continues to reward homes that are well-prepared, updated, and priced correctly.

In April, 34% of Orange County homes sold above asking price, while another 18% sold at list price. Many of those homes moved quickly, with median market times of just one week. Buyers are still competing aggressively for homes that feel move-in ready and check all the boxes.

Thomas described these as “showcase homes” — properties where sellers put real effort into presentation, updates, curb appeal, and pricing strategy before listing. Those homes are still creating urgency and multiple-offer situations even in a slower overall market.

Meanwhile, homes that need work, have deferred maintenance, or are overpriced are sitting longer and often selling below asking price. In other words, the market has become far more selective than it was during the pandemic frenzy.

Orange County inventory has also been rising more slowly than expected this spring. Active listings increased just 2% over the last couple weeks to 4,307 homes, while buyer demand jumped 6% during the same period. Demand is now at its highest level since May 2024.

That combination actually reduced Orange County’s Expected Market Time from 80 days to 77 days, signaling a market that has recently gained some momentum despite rate pressure.

The luxury market also improved. Homes priced above $2.5 million saw stronger demand and lower market times, particularly in the $2.5 million to $4 million range.

Mortgage Rates Are Moving Higher Again

One of the biggest stories this month is the return of rising mortgage rates.

According to Zillow, the daily 30-year mortgage rate climbed as high as 6.75%, reaching a nine-month high. Inflation concerns, elevated energy prices, tariffs, and uncertainty around future Federal Reserve policy have all contributed to rates moving upward again.

Redfin reported a similar trend, noting that pending home sales slipped 1.1% week over week after several weeks of stronger activity. Mortgage purchase applications also dropped as rates rose.

There’s also growing concern over how global events may affect inflation and borrowing costs moving forward. Tensions involving Iran and continued instability surrounding oil markets have added additional uncertainty to financial markets and mortgage pricing.

Even with those pressures, today’s rates are still slightly better than they were during parts of last spring, when rates climbed above 7%. That has helped keep buyer activity from falling off completely.

Still, many buyers are once again finding themselves recalculating budgets as monthly payments rise.

Inventory Is Improving — But Affordability Is Still the Real Problem

Nationally, inventory continues to recover, especially in parts of the South and West where homebuilding surged over the last several years.

Zillow highlighted markets like Austin, where inventory is now more than 50% above pre-pandemic levels. Those areas are seeing some of the strongest sales growth in the country because buyers finally have options again.

But nationally, inventory still remains nearly 19% below historical norms.

And according to National Association of Realtors, the bigger issue may not simply be the number of homes available — it’s the type of homes available.

Middle-income households earning around $75,000 annually can currently afford only about one-quarter of listings nationwide. In a more balanced market, they would be able to access closer to 44% of listings.

The problem is especially severe for entry-level buyers. NAR estimates the market needs roughly 300,000 additional homes priced below $261,000 to better meet current demand.

That affordability mismatch is one of the biggest reasons housing activity still feels sluggish despite improving inventory.

Buyers Have More Leverage — But Not Everywhere

One of the biggest shifts happening in today’s market is that conditions are no longer the same across every region — or even every neighborhood.

In some markets, rising inventory is giving buyers a little more breathing room and more time to make decisions. But in many parts of California and other inventory-constrained markets, desirable homes are still moving quickly, especially when they’re updated, well-maintained, and priced correctly.

That’s creating a more selective housing market overall. Buyers are becoming more cautious because of mortgage rates and affordability pressures, while sellers are finding that preparation and pricing matter far more than they did during the frenzy of the pandemic years.

The result is a market where some homes sit longer and require price adjustments, while others still generate strong activity and multiple offers almost immediately.

The Bigger Economic Picture

During Nuvision’s latest Economic Forecast Webinar, Christopher Thornberg pushed back hard against many of the recession narratives dominating headlines right now.

Thornberg argued that despite weak consumer sentiment and constant economic pessimism, actual consumer spending and household finances remain relatively strong. He pointed to healthy consumer balance sheets, strong net worth levels, low foreclosure activity, and continued spending on travel, restaurants, and entertainment as evidence that the broader economy is still holding up better than many expected.

He also warned that many buyers waiting for dramatically lower mortgage rates may end up disappointed.

According to Thornberg, long-term structural issues — including federal deficits, inflation pressures, labor shortages, and global instability — could keep upward pressure on rates moving forward.

He also emphasized that today’s housing challenges are less about a housing crash and more about supply constraints and what economists call “filtering” — the normal process where homeowners move up the housing ladder, creating opportunities for first-time buyers. Right now, many owners remain locked into low mortgage rates and simply don’t want to move.

That’s helping keep inventory tight in many markets, even as affordability pressures continue.

What it all means for our Members

The housing market isn’t collapsing, but it also isn’t returning to the ultra-competitive conditions we saw during the pandemic years.

Instead, the market is becoming more selective, more localized, and far more dependent on pricing, inventory, and affordability.

Buyers finally have more negotiating power in many parts of the country. But in markets with tight inventory and desirable homes, competition is still very real. At the same time, higher mortgage rates continue to pressure affordability and keep many would-be buyers cautious.

For sellers, preparation matters more than ever. And for buyers, flexibility and realistic expectations are becoming increasingly important in a market that no longer behaves the same everywhere.

For a deeper look at the economic forces shaping today’s housing market — including inflation, rates, labor trends, consumer spending, and where the economy may be headed next — watch Nuvision’s latest Economic Forecast Webinar