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The housing market is showing signs of life as inventory levels are at their highest since May 2020, according to Realtor.com's August Housing Trends Report. This increase in supply might encourage potential homebuyers who have been waiting for a dip in prices to enter the market.
The 30-year mortgage rate remained unchanged at 6.35% this week as investors await the Federal Reserve's decision on interest rates later this month. If the Fed decides to make a significant interest rate cut to manage inflation levels, this could potentially lead to a decrease in mortgage rates, especially if the Fed begins cutting rates.
Despite the market's current stagnation, there's a possibility of a mini-rally this fall season if potential homebuyers are ready to come off the sidelines. The housing market's performance is influenced by several economic reports released this week, which show an increase in housing inventory levels.
The expectation is that the Fed will start cutting interest rates to manageable levels to help the economy avoid a hard landing. The extent of the first cut and how many follow will significantly influence mortgage rates.
For now, investors are taking a wait-and-see approach as they anticipate Friday's August jobs report. A weak jobs report could lead to a further dip in the 10-year treasury rate, which influences mortgage rates.
The combination of declining rates and increased housing inventory could stimulate activity in a sluggish housing market, according to Realtor.com's Senior Economist Joel Berner. With inventory at its highest levels since May 2020, buyers might be ready to re-enter the market.
While supply varies by market, the overall trend shows inventory at its highest levels since May 2020, according to Realtor.com's August Housing Trends Report. A similar report from HouseCanary found that the gradual rise is bringing some normalcy back to the housing market.
\"Buyers and sellers who have been sidelined from the market could just about be ready to get back in the game,\" said Jeremy Sicklick, CEO of HouseCanary.
Homebuyers who have been waiting for rates to drop might find more opportunities in the coming weeks, even if fall is busier than normal, according to Danielle Hale, chief economist at Realtor.com. \"The boost in activity is unlikely to overwhelm the usual seasonal slowdown. Shoppers who are out this fall are likely to face lower competition than is expected in spring 2025,\" Hale said.
Lower mortgage rates have led to more attractive monthly payments, according to Redfin. Its latest report found that even though home prices remain near record highs, the average monthly housing payment in the four weeks ending Sept. 1 is nearly $300 lower than April's all-time high. The median U.S. housing payment now sits at $2,534, according to the report.
Other signs of life include indications that buyers are out there, ready to make a move. Mortgage purchase applications rose 3% compared to the week prior and are now just 4% below levels seen a year ago, according to the Mortgage Bankers Association. Government-backed loans led the way, said Joel Kan, MBA's deputy chief economist.
Redfin's demand index, which includes homebuying services like touring, is at its highest level since May. \"There is demand for desirable, move-in ready listings, but some house hunters are in a holding pattern because the industry is in flux,\" said Van Welborn, a Redfin Premier agent in Phoenix.
