T
he latest employment report sent mixed signals, but a surge in wage growth has all but ruled out rate cuts for the spring homebuying season. January's jobs numbers were softer than expected, with 143,000 new positions created, but monthly wage growth exceeded forecasts at 0.5%. The unemployment rate ticked down to 4%, according to the U.S. Bureau of Labor Statistics.

    This development has given the Federal Reserve little reason to cut short-term rates when it meets in March, and economists predict a continued cautious approach. "The Fed's been waiting for either real inflation progress or some labor market weakness before delivering more rate cuts," said Sam Williamson, senior economist at First American. "January's jobs report didn't deliver on either front."

    As a result, mortgage rates are likely to remain near 7% in the coming weeks. However, other factors like pent-up demand may influence whether homebuyers enter the market despite elevated rates. With more high-wage jobs being added and overall earnings rising, prospective buyers will feel more confident heading into spring.

    Inventory is also on the rise: early 2025 data indicates a significant increase in choices this spring compared to recent years. Newly listed homes are up 10.8% year-over-year, while homes actively for sale have increased by 24.6%. The average days on market has slowed to 73, making January's sales pace the slowest since 2020.

    While rates remain high, it's possible that sellers may grow tired of waiting for significant changes and start chiseling prices down. As one economist noted, "it's a buyer's market in many ways," with more choices available than in recent years.