Why 7% Mortgage Rates Haven't Lowered Home Prices

U.S. home loan rates were above 7% by October 15, 2026, while home prices stayed high, The New York Times reported. Rates had crossed 7% in September 2026 for the first time in almost two years and kept climbing, Bloomberg reported.

J.P. Morgan Global Research expects U.S. home prices to stay flat in 2026 and rise 3% in 2027, J.P. Morgan projected.

The broader context here is what flat means in plain terms. It means prices in dollars stay about the same this year, then grow a little next year. That is the call even though prices held firm through mid-October.

Goldman Sachs says high loan rates and few homes for sale continue to make housing hard. Loan rates jumped to a 20-year high in 2022 and have stayed high since, Goldman Sachs noted.

In my view, the shortage of homes for sale matters most. Think of it like an auction with only a few houses and many bidders. Prices stay up even when borrowing costs a lot, so sales fall more than prices do.

Goldman Sachs Research forecasts two more cuts by the Federal Reserve, the U.S. central bank, next year. That would leave its short-term rate at 3-3.25%, Goldman Sachs projected in a note published December 3, 2025.

What matters for your money is that home loan rates have not followed those cuts step by step. The Fed sets a short-term rate. Your mortgage rate follows long-term borrowing costs, so Fed cuts pass through slowly.

Goldman analysts raised their home price forecast to 4.5% for 2024 and 4.4% for 2025, up from 4.2%, Goldman Sachs reported on September 11, 2024. That came after the firm said prices would climb as loan rates fell to 6.3% in 2024.

Goldman Sachs Research had earlier projected U.S. home prices would fall about 5% to 10% from the peak, Goldman Sachs reported on October 6, 2022. The same model projected Canadian prices would fall about 15% from the peak.

Looking back helps separate what was guessed from what happened. Those drops were forecasts made right after fast rate hikes. They did not happen. Even a small dip to 6.3% in 2024 brought back buyers and higher forecasts.

In my view, plan for high rates to stick around. The December 2025 forecast pointed to 3-3.25% next year, yet September-October 2026 brought 7%-plus mortgages and high prices. For buyers, that means budget on costly loans. For savers, if prices stay flat in 2026 with 3% growth in 2027, returns must come from interest earned until more homes are listed.