How Higher Mortgage Rates Could Actually Increase Housing Supply

You may have heard that housing inventory isn’t increasing as quickly as it once was. And that may have you wondering whether you’ll be able to find the right home when you’re ready to move.

But that could soon shift. Here’s why the number of homes available may begin climbing again.

Housing Supply Growth Is Slowing, Not Stopping

According to Realtor.com, active listings increased 2.1% year-over-year in July. That’s down from 10% growth in January and 31.5% in May 2025—clear evidence that inventory gains have slowed considerably.

However, inventory growth has remained within a similar range for the past three months. That consistency suggests the slowdown may be close to bottoming out (see graph below):

So, what does this mean for your home search?

New listings are still hitting the market. Every bar represents a period when inventory increased, so don’t let slower growth convince you that your options are disappearing. And with the numbers becoming more consistent recently, there’s reason to feel encouraged.

More Homes Are Available Now Than at Any Point Since 2019

Compared with the historic lows of 2021, housing inventory has made a significant comeback. Nationwide, the number of homes for sale has now increased year-over-year for 33 consecutive months, nearly doubling in just a few years. So, try not to focus too heavily on the slower pace of growth.

In fact, this July had more homes available than any July since 2019 (see graph below):

The market still needs roughly 150,000 additional listings to return to pre-pandemic inventory levels, but it’s getting closer to normal quickly. Experts believe supply could reach 2019 levels by the end of this year, despite the recent slowdown in growth.

And one unexpected factor may help make that happen: mortgage rates.

How Higher Mortgage Rates Could Increase Housing Inventory

Here’s how it works: when mortgage rates rise, housing inventory often increases too. As Mike Simonsen, Chief Economist at Compass, explains:

“Inventory typically rises when mortgage rates increase and falls when rates decline. As rates eased between last July and March, much of the recent inventory growth disappeared. If rates remain elevated or climb higher, housing supply could begin building again”

Mortgage rates are expected to remain in the mid-to-upper 6% range for some time. Meanwhile, Realtor.com’s latest forecast projects that housing inventory will finish 2026 3.6% higher than the previous year.

That points to two key takeaways:

• Inventory growth is expected to gain some momentum through the remainder of the year.
• The supply of homes for sale is projected to finish the year near historically normal levels—roughly where it stood at the end of 2019.

For buyers, that’s encouraging news. While today’s mortgage rates may be higher than you’d like, they’re helping increase the supply of available homes. More inventory means more options, greater negotiating power, and less pressure to make a rushed decision.

Bottom Line

Housing inventory is gradually improving, giving buyers more choices when they’re ready to move. Curious about what’s currently available in your area? Connect with a local real estate agent to explore your options.