U.S. Home prices climbed to an all-time high at the end of 2023, according to the S&P CoreLogic Case-Shiller Home Price Index. Indeed, the 20-city Case-Shiller report, released this morning, showed home prices rose 6.1% year-over-year, surpassing November’s 5.4% reading and beating estimates of a 5.9% jump. This marked the 11th consecutive month of rising home prices in the 20 largest metropolitan cities.

What does this mean for the housing market?

Well, more of the same.

Despite a general decline in housing demand in the past year and a half or so, home prices have seemingly only continued to balloon. Economists generally attribute the resilience of home prices to the pinched supply of real estate for sale on the market.

Considering the circumstances, this is understandable. As mortgage rates soared to historic highs off the back of the Federal Reserve’s notoriously aggressive rate hike campaign, pandemic-era homeowners have opted to hold onto their properties at rock-bottom interest rates rather than jump onto a new, much pricier home loan.

As a result of the inventory shortage, prices continue to climb, even as demand wavers in most markets. Mortgage applications, a proxy for housing demand, fell almost 11% last week as mortgage rates reached back up to 7%, per the Mortgage Bankers Association.

The fact is, mortgage rates have priced many would-be homebuyers out of the market completely, with little impact on home price growth.

Today’s report reinforces the ongoing affordability crisis that has taken root in the real estate market over the past two years.

When Will Home Prices Ease?

Despite hopeful whispers of a housing market crash, there remain some robust barriers to any notable decline in property prices.

Many economists believe home price growth will slow down as mortgage rates fall, as some pandemic-era homebuyers feel comfortable hopping on a comparably cheaper mortgage.

That being said, mortgage rates are influenced by the 10-year Treasury yield, which is subject to the Fed’s policy decisions. As such, don’t expect mortgage rates to creep down until the central bank decides to cut rates, which this month’s inflation reading suggests may not happen until the back end of 2024.

Even then, it’s unclear just how much inventory will be unleashed should mortgage rates fall to the 6% range. Most housing economists expect home prices will continue to climb this year, albeit at a slower clip.

“Sellers are likely to remain reluctant to give up their low interest rate for a much higher one, so inventory will remain constrained,” said Chen Zhao, lead of the Economics Team at Redfin, earlier this year. “As more time passes, more homeowners may be ‘forced’ to sell due to life events, so inventory may rise from the current anemic levels, but it’s unlikely to increase much. That means that prices are unlikely to fall on a year-over-year basis, unless demand falters.”

On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.