Have you ever wondered why home prices don't seem to drop even when the market slows down? It's a phenomenon called "downside stickiness," and it's happening right now in the housing market.

The "Downside Sticky" Effect: Many potential sellers, especially those who bought in the last three years, are unwilling to sell at a loss. When Sellers factors in the costs to transact, their calculations lead them to list the home at a price above what the market will bear. When a listing doesn't sell, the Seller decides to withdraw it from the market. This creates a real cap on inventory growth.

National inventory hasn't increased in two months, holding steady around 863,000 single-family homes. This is in stark contrast to last year, when inventory was rising quickly.

Fewer Sellers in the Pipeline: The pace of new listings is shrinking. This week there are just over 66,000 newly listed homes, which is 5% fewer than the same week a year ago. This trend, coupled with elevated withdrawal rates, makes it hard for inventory to grow. Supply and demand, as always, are the ultimate arbiter of price.

Slightly More Sales: In addition to the seller cap, home sales are inching up. That means inventory is getting absorbed more quickly. Stats nationally showed 77,000 total sales contracts started this past week (64,000 single family, 13,000 condo), an almost 5% improvement over last year. Condo sales, in particular, are up 9%.

While some buyers are waiting for both lower interest rates and lower prices, the "downside sticky" phenomenon suggests we're unlikely to get both.