A
s the housing market navigates the early weeks of 2024, a subtle shift is underway. Mortgage rates have stabilized in the upper-6% range, marking a departure from the recent trend of declines. This stability comes as new listings begin to rise, hinting at an impending surge in inventory ahead of the spring season.

    Key takeaways:

    * The 30-year fixed-rate mortgage averaged 6.89% this week, following three consecutive weeks of slow but steady decreases.

    * A growing number of homeowners now hold mortgages with rates above 6%, suggesting that the interest rate lock-in effect may be easing.

    * Redfin reports a five-month supply of homes, mirroring levels seen in 2019, while more sellers are cutting prices.

    Despite ongoing uncertainty surrounding tariffs and federal job cuts, mortgage rates have remained relatively stable since the start of the year. The 30-year fixed-rate mortgage averaged 6.89% this week, down from 6.95% last week but still hovering around the 7% level.

    The relative stability in rates coincides with recent data indicating a strong economy, according to Sam Khater, Freddie Mac's chief economist. As a result, cash buyers may become increasingly prominent in the market, said Lisa Sturtevant, chief economist at Bright MLS.

    "With rates remaining near 7%, buyers who can bring all-cash offers will be even more favored," Sturtevant noted. "This could lead to an increase in cash transactions during the first quarter of the year."

    Mortgage applications saw a 2.2% week-over-week increase, driven by refinancing activity. Refinance applications jumped 12% at the end of January compared to the previous week, while purchase activity declined 4%, said Joel Kan, MBA's deputy chief economist.

    The lock-in effect caused by ultra-low interest rates during the pandemic era appears to be easing up. Redfin estimates that 17% of homeowners now hold mortgages with rates above 6%, the highest share since 2016. This increase is attributed to a combination of life events and growing acceptance of higher rates as a new normal.

    New listings are on the rise, and price cuts are becoming more common – trends that could be contributing to an increase in inventory ahead of the spring homebuying season. Redfin estimates supply to be at five months, approaching levels seen in February 2019.

    Homeowners, like buyers, are realizing that rates may not fall significantly, leading them to adjust their expectations and pricing strategies. As a result, price reductions have increased this past week, a trend expected to continue until mortgage rates come down further.