T
he housing market is slowly shifting in favor of buyers, but stubbornly high mortgage rates are making the transition difficult. Key indicators suggest that borrowers are already reacting to the rise in mortgage rates, with applications dropping off and inflation expected to keep rates elevated into 2025.

    The median home asking price has increased by just 2.9% over the past year, the smallest gain in over four months, according to Redfin's latest report. Meanwhile, active listings are up nearly 12% year-over-year, but new listings are declining as homeowners become less willing to sell at lower mortgage rates.

    As home prices soften, sellers are becoming more reluctant to list their homes, said Lisa Sturtevant, chief economist at Bright MLS. Mortgage rates have climbed again, reaching 6.75%, making it difficult for buyers to qualify for a mortgage. The median income nationally is around $80,000, but the current 30-year average rate requires an income of nearly $130,000 to qualify for the median-priced home.

    The Federal Reserve's decision on short-term interest rates could impact mortgage rates, with some experts warning that cutting rates could lead to higher mortgage rates. Inflation levels are expected to continue rising, which will likely keep mortgage rates elevated. Despite these challenges, demand remains strong, and sellers are becoming more willing to negotiate prices, potentially leading to more sales.

    Builder confidence has seen a slight boost due to tax cuts, but it's still near its lowest level in three years, weighed down by tariff concerns and economic uncertainty. As the market continues to adjust, buyers should be prepared to make multiple offers and be flexible with their price expectations.