(KRON) — Due to fewer homes being listed for sale and a strengthening labor market, mortgage rates are still hovering near 20-year highs. However, economists say we may be heading toward a more balanced market.

Senior Zillow Economist, Orphe Divounguy, details a trend that Zillow says is actually resulting in a growth in home values that has continued through the summer. The combination of high mortgage rates and low inventory across the country is keeping potential homebuyers off the market and sellers in their homes.

“Zillow research shows that 70 percent of homeowners and sellers end up buying again. And, so a lot of these homeowners are sitting on the sideline, enjoying near-record home equity and choosing not to move,” said Divounguy.

According to Divounguy, nationwide home values appreciated more than 1.5 percent through the summer, and he expects that number to grow to 6.5 percent by next July.

In the Bay Area, Divounguy forecasts prices rising 2.5 percent.

“A recent Zillow survey shows that nearly a quarter of existing homeowners plan to sell within the next three years, which is up 15 percent from a year ago,” said Divounguy. “We’re seeing that homeowners are essentially going to get used to this environment, you know, where seven-percent mortgage rates become the norm.”

Affordability is uniquely challenging in the Bay Area.

Divounguy says in the Bay Area, “A new buyer is facing a monthly mortgage payment that is roughly 67 percent of their income.”

Divounguy cites the Bay Area’s strong job market (outside of the tech industry) and incomes adjusted for inflation are increasing — adding purchasing power.

“I expect that as inflation continues to moderate, demand will return in those markets where they are highly sensitive to interest rates,” Divounguy.

A recent Redfin report also shows prices are going up while demand goes down. Nationwide, the real estate brokerage says the total number of homes on the market has dipped 18 percent year-over-year. This is the biggest decline since February 2022.

Homeowners are opting to keep their homes off the market while mortgage rates mirror the highs recorded at the turn of the century.

Divounguy says “Buyer demand is also falling across the country, leading home prices to rise with lowering inventory.”

“We have existing homeowners who, basically, got an opportunity to either get in the housing market when mortgage rates were really low or were able to refinance at a very, very low rate — they’re simply not wanting to sell their homes,” said Divounguy.

Divounguy says new research shows 70 percent of homeowners end up buying again.

“The fact that builders are still building, means supply is increasing and we ought to see a more balanced housing market going forward. With demand and supply coming into better balance, maybe a healthier housing market at the start of 2024,” said Divounguy.

Divounguy says the slide has been more dramatic in the Bay Area.

“Inventory is down 35 percent when compared to last year,” said Divounguy. “That’s a market where you have demand falling even more than supply has, so prices in the Bay Area are down roughly 5 percent year-over-year.”