If It’s Still a Seller’s Market… Why Does It Feel Soft?
If you’ve been paying attention to the real estate headlines, you’ve probably heard some version of:
“The housing market is down.”
“Homes aren’t selling like they used to.”
“Prices are down in some major metro areas.”
And yet… here in Williamsburg and the Greater Peninsula, while sales are indeed slow, prices are still rising.
So what’s going on?
Here’s the simple answer:
The market feels slow because fewer homes are selling — not because there aren’t enough buyers but because fewer homeowners are choosing to sell.
Feel free to download the FULL REPORT below or READ ON to get detailed insights.
The Market Is “Down”… But Not the Way Most People Think
Let’s start with two facts that seem to contradict each other:
1) Prices have continued to climb even after the massive jump in mortgage interest rates that occurred in mid 2022.
Across Williamsburg, James City County, York County, Newport News, Hampton, and Poquoson, the median sale price moved like this:
- 2020: $241,950
- 2021: $261,500
- 2022: $285,000
- 2023: $310,000
- 2024: $325,000
- 2025: $336,000
While the rate of home price appreciation is no longer in the double digits like it was in ’20, ’21, and the first half of ’22, prices are still appreciating at roughly:
- 2022 → 2023: +8.8%
- 2023 → 2024: +4.8%
- 2024 → 2025: +3.4%
2) Sales volume fell hard in spring 2022 and even harder in second half of 2022 which coincided with an unprecedented leap in mortgage interest rates.
Mortgage rates didn’t drift higher in 2022 — they reset violently. After bottoming out near 3% in 2021, rates began rising in early 2022, climbing from roughly 3.2% in January to just under 5% by late spring. The real shock came next: rates surged again in late summer and early fall, briefly topping out around 7.1% in October 2022. In less than a year, mortgage rates had more than doubled, representing one of the fastest interest-rate increases in modern housing history. Since then, rates have largely settled into the high-6% range, creating a fundamentally different housing environment than the ultra-low-rate era that preceded it.
Now look at the number of homes sold each year:
- 2021 (peak): 9,823 homes sold
- 2022: 8,147 homes sold
- 2023: 6,551 homes sold
- 2025: 6,178 homes sold
That’s a drop of 3,645 sales per year from the peak.
In percentage terms:
Sales volume is down about 37% from the 2021 peak.
That’s why the market feels “soft.”
Not because homes are cheap.
Not because buyers vanished.
Because there are fewer transactions happening.
A quick national comparison (because this wasn’t just “a local thing”)
Nationally, existing-home sales (NAR annual totals) did something similar:
- 2016: 5.45M
- 2021: 6.12M
- 2024: 4.06M
So yes — the national market also peaked in 2021 and then fell sharply in 2022–2024.
That said, here’s what stands out:
- The drop from the 2021 peak to 2024 was about the same nationally (-33.7%) and locally (-35.1%).
- The takeaway is simple: we didn’t escape the national slowdown — but we also didn’t see prices collapse locally the way some major metros did.
Why Would Fewer Homes Sell in a Seller’s Market?
A seller’s market is defined as a market where there are more buyers than sellers. While it is true the spike in interest rates priced many home buyers out of the market and there were fewer buyers, the other and more significant effect it had was to reduce the number of home owners listing their homes by way of the “lock-in effect”.
So, that’s what we’ve seen since late 2022: fewer sellers listing.
Yes, higher interest rates reduced buyer demand. That’s real.
But here’s the key point:
Interest rates affected sellers even more than they affected buyers.
And that’s what created today’s strange situation:
- fewer sales
- but still upward price pressure
- and still a lot of buyer competition for good homes (even into higher price points)
The Lock-In Effect (A Real-World Definition)
The lock-in effect is when homeowners don’t move — even if they want to — because moving would dramatically increase their monthly payment.
Here’s why.
In 2020–2021, mortgage rates dropped into the low 3’s (even high 2’s). A huge number of homeowners refinanced. They locked in a monthly payment that feels… honestly… kind of magical now.
Then rates jumped quickly. By 2022–2025, buyers were looking at rates more like 6–7%. (Rates have recently dipped into the low 6%’s as of Q4 2025.)
So homeowners started asking a brutal question:
“If I sell… how will I afford my next home?”
Not because they can’t sell their home and make a ton of money.
Most sellers can sell their home and realize significant equity due to higher prices.
The problem is affording a replacement home..
A Move-Up Example (How Normal Used to Look)
In the past, there were many sellers we would call “move-up” buyers. These are current homeowners who decide that they need or want a bigger house, a newer house, a house in a better neighborhood or school district, etc. In the historically stable interest rate environment from 2010 to 2020, these buyers typically purchased homes priced at or just above 50% of what their current home is worth. But as we will see, when the interest rate on the new purchase is DOUBLE the rate on their current mortgage, the math and finances change in dramatic ways.
Before the lock-in era, moving up was pretty predictable.
Example:
- Sell a $350,000 home
- Buy a $525,000 home
- Assume a 20% down on each
At stable rates around 4%, the monthly payment might go from:
- ~$1,377/month
to - ~$2,005/month
That’s an increase of ~$628/month.
Not fun — but understandable and a historically acceptable increase in exchange for getting a nicer home.
It’s the kind of change people could plan around.
The Same Move After 2022 (Where People Tap Out)
Now assume the homeowner refinanced into a low rate on the existing home (3.25%), but today’s replacement rate is around 6.5%.
Same homes. Same prices. Same down payment.
Payment goes from:
- ~$1,219/month
to - ~$2,654/month
That’s a jump of ~$1,435/month.
That’s no longer a normal “move-up” scenario. It’s the kind of monthly jump that forces even well-qualified homeowners to stop and ask, “Are we really about to double our payment just to move?” And that’s why so many homeowners simply… stay put.
“Okay Brad… So Who Is Selling?”
Some reasons people sell are urgent “hands are forced” situations. Some are strong quality-of-life reasons, call them semi-urgent. And some are more preference-based — nice to have, but not urgent. You can imagine a continuum from HAVE to sell all the way to it would be nice to sell, but we can live with staying.
Some sellers sell no matter what:
- Estate sales/Current homeowner dies.
- Sellers who have to downsize / move to assisted living for health.
- Divorce
- Military/Job Relocation
- Homes that are falling apart, extreme deferred maintenance
- Other Financial hardship
These are “life happens” sellers.
But the market is missing a big group we used to count on:
Sellers who would like to move — but don’t have to. These would include:
- People who want a bigger house
- People who want to move to a better school district
- People who want to reduce their commute time and move closer to work/ a new job.
- People who want a newer house or a house with a certain amenity their home doesn’t have (eg. Garage, office, big yard, etc.)
- People who want to downsize into a smaller home.
- People who want to move to be closer to family.
In normal times, people with moderate-to-high motivation to move (but who didn’t HAVE to move) would list (sometimes too high), the market would educate them, and many would eventually sell or withdraw their listing..
Today?
They don’t list at all.
And this results in our market having hundreds of fewer homes listed for sale than we used to have.
Why 2026 Might See More Sales (Even if Rates Don’t Fall Much)
Here’s where it gets interesting. The lock-in effect is powerful, but it is not permanent. Over time, life continues to change, and people who have been staying put since 2023 gradually become less willing — or less able — to keep waiting.
- The family that “made it work” in a too small house in 2023 now has another 3rd child
- The stairs that were annoying in 2022 are now impossibly painful
- The “we’ll wait one more year” plan has lasted 3 years now and a “life on hold” is taking its toll.
- More people start accepting the new normal of higher interest rates
Expectations have a lot to do with the decision to wait. In 2023, after seeing rates spike by roughly four percentage points in a year, it might have been reasonable for some people to expect them to come back down just as fast. That didn’t happen. Similarly, homeowners who remembered the historically unprecedented decline in home prices from 2008 to 2012 might have reasonably expected to see home prices decline again. They didn’t. And in our market they likely won’t — because the fundamentals underlying the housing market today are completely different from the fundamentals that caused the housing crash of 2008.
By 2026, those expectations are harder to defend.
So some sellers come back not because rates are amazing, but because life doesn’t pause forever.
That’s why I expect 2026 to show a modest increase in sales volume — not a return to 2021.
Importantly, even a modest dip in mortgage interest rates — particularly if driven by direct federal intervention — can act as a catalyst for sellers who are already near the tipping point. As of the time of writing, the executive branch has announced plans to direct Fannie Mae and Freddie Mac to enter the mortgage-backed securities market with up to $200 billion in purchases, an action that can meaningfully compress mortgage spreads, at least in the short term. In response to this news alone, mortgage rates have already moved from the mid-6% range into roughly 5.85–6.00%. Absent such intervention, my baseline expectation for 2026 mortgage rates would be closer to the low-6% range; with it, a temporary move toward the mid-5% range becomes plausible.
For homeowners who have been waiting to move since 2023, the decision is rarely about finding an “amazing” rate — it’s about crossing a threshold where the numbers finally feel livable. Combined with the steady pressure of life continuing and the growing acceptance of a higher-rate “new normal,” even limited rate relief can loosen the lock-in effect at the margin. The result is not a surge in listings, but a modest re-entry of deferred sellers who are also buyers, supporting higher transaction volume without fundamentally changing the seller-market dynamics that define our local market.
- The family that “made it work” in a too small house in 2023 now has another 3rd child
- The stairs that were annoying in 2022 are now impossibly painful
- The “we’ll wait one more year” plan has lasted 3 years now and a “life on hold” is taking its toll.
- More people start accepting the new normal of higher interest rates
Expectations have a lot to do with the decision to wait. In 2023, after seeing rates spike by roughly four percentage points in a year, it might have been reasonable for some people to expect them to come back down just as fast. That didn’t happen. Similarly, homeowners who remembered the historically unprecedented decline in home prices from 2008 to 2012 might have reasonably expected to see home prices decline again. They didn’t. And in our market they likely won’t — because the fundamentals underlying the housing market today are completely different from the fundamentals that caused the housing crash of 2008.
By 2026, those expectations are harder to defend.
So some sellers come back not because rates are amazing, but because life doesn’t pause forever.
That’s why I expect 2026 to show a modest increase in sales volume — not a return to 2021.
The Bottom Line: What Does This Mean for Buyers and Sellers?
If you’re a BUYER:
The market may feel “slow,” but good homes still sell for very near or even above full list price.
Don’t assume “down market” means “a lower priced market.”
If you’re a SELLER:
Prices remain supported because inventory is still tight — more buyers than sellers.
But you should plan carefully around your next move — because replacement housing is the real constraint.
If you’re just watching from the sidelines:
Here’s the headline:
The market isn’t weak. It’s locked up like traffic at the HRBT.
Low sales volume makes it feel soft — but low inventory keeps prices firm.
If you want to talk through your situation — whether you’re thinking of moving this year or just curious, just reach out. I’ll give you the honest version, even if the honest version is “don’t move yet.”
Recent Posts
Hi, I’m Brad Anderson!
I’m your local Williamsburg real estate agent and, most importantly, your ‘Friend in Real Estate.’
Beyond just market insights for Williamsburg and Peninsula,
I’m here to guide you through every aspect of your journey. That includes even those heartfelt decisions about what truly matters when you’re moving.
I’ll be right there beside you as we explore our unique market, making sure you feel confident and truly supported.
Discover more from Brad Anderson - Williamsburg Realtor
Subscribe to get the latest posts sent to your email.