How Interest Rates Shape Home Prices from List to Close

If you’ve been around real estate conversations, you’ve probably heard people say “interest rates are up” or “interest rates are down” and recently you may have heard some “rates should come down soon.” But what does that actually mean for you when it comes to buying or selling a home? Let’s keep it simple.

Back to January 2021: The Low Rate Era

In January 2021, mortgage interest rates were sitting at historic lows, right around 2.65% for a 30-year fixed loan. That meant buyers could afford “more house for the money.” If your budget was based on a monthly payment, those low rates stretched your buying power further.

As a result, homes were flying off the market and often selling at or above asking price. Sellers had the upper hand because buyers had cheap borrowing power.

Fast Forward: 2024–2025 in Champaign County

From January 2024 through September 2025, we’ve been tracking how close homes closed compared to their original list price. Here’s what we saw:

• The average ranged from about 96% to just over 102% of the original list price.
  

• In some months, homes were actually selling for more than they were listed for.
  

• By September 2025, the average had slipped back down to about 96.9%, which means homes were closing a little under list price.
  

This shows how pricing power shifts. When borrowing costs go up, buyers get more cautious and often negotiate harder, pulling that list-to-close number down.

Why Rates Matter So Much

Think of interest rates as the “cost of your money.”

• Lower rates = your money goes further, so buyers can offer stronger prices.
  

• Higher rates = your monthly payment jumps, so buyers have to pull back, often asking for price reductions or being unwilling to chase bidding wars.
  

It’s not just math, it’s psychology too. When rates rise, buyers feel less urgency and more hesitation. When rates fall, they feel confident stretching a bit higher.

What This Means for You

For sellers: Pricing matters more in today’s market. Gone are the days of simply listing high and watching offers roll in. A home that’s priced right from the beginning has the best chance of closing close to its original list price.

For buyers: Don’t just focus on the price tag. Pay attention to the monthly payment. A $10,000 difference in price may matter less than a half-percent shift in interest rates.

For our market overall: The dance between list price and closed price is really the story of interest rates playing out in real time. When rates dipped, homes closed at or above list. As rates rose, that gap widened, with homes closing further under list.

Wrapping It Up

Real estate isn’t just about list prices and sale prices. It’s about how much buying power people actually have, and that all comes back to interest rates. From the low-rate boom of 2021 to today’s higher-rate reality, the numbers in Champaign County tell the story clearly.

Homes still sell. People still move. But how close those sales are to list price? That’s interest rates at work.