Dave: I wish I had a crystal ball. Rates have gone up and real estate prices have soared. It would not be usual for real estate to slow down because of these two factors which negatively affect affordability. And the real estate market has slowed down.

But what makes this slowdown different is that these factors typically result in lowering demand. That has not happened yet because of the shortage of inventory. Thus, we have a major catch-22. Buyers keep bidding up the few homes that are available. It seems like every loan officer I talk to have several pre-approved buyers ready to purchase but they are not having luck getting a contract through.

In a normal market, many pre-approved buyers making offers would translate into several transactions in a month. Certainly, some of these prospective buyers are being weeded out because of higher rates. But this market is different because there is still not enough inventory.

One of the keys to the turnaround will be the increase in inventory. There are two parts of this equation. The first is more sellers willing to sell. The other is, less buyers vying for every listing, which also means that existing inventory stays on the market longer. Even though there is excess demand right now, higher mortgage rates and higher home prices are translating into less buyers affording or desiring to purchase, thereby lowering demand.

This lower demand will cause home price appreciation to slow. As this happens, fewer sellers will be waiting to get a higher price. They also will be more confident in finding their next home and thus more confident in selling. Thus, the higher rates and prices we were experiencing and causing pain for buyers will actually make it easier for buyers and sellers to purchase in as times go on... hopefully.

Dave Hershman is Senior VP of Sales of Weichert Financial and the top author in the mortgage industry. Dave has published seven books, as well as hundreds of articles and is the founder of the OriginationPro Marketing System and Mortgage School – the online choice for expert mortgage learning and marketing content. His site is www.OriginationPro.com and he can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..