Mortgage Rates Just Hit a Nearly 8-Month Low: Should Homebuyers Shop Now Rather Than Wait Until Spring?

 

 

 

 

 

 

 

 

 

 

 

By Margaret Heidenry

 

Mortgage rates for a 30-year fixed-rate home loan sank to an average of 6.60% for the week ending Jan. 18, hitting a low not seen since last spring, according to Freddie Mac.

Forget waiting for the busy spring housing market to bloom—the snowy weeks ahead might just turn out to be a good time to buy a home.

“Mortgage rates decreased this week, reaching their lowest level since May of 2023,” says Freddie Mac chief economist Sam Khater. “This is an encouraging development for the housing market and in particular first-time homebuyers who are sensitive to changes in housing affordability.”

In addition to friendlier mortgage rates, homebuyers who brave the cold can also enjoy a fresh wave of new listings, which remained in short supply throughout much of last year.

Will this winter—usually a slow time of hibernation in the real estate market—attract buyers and sellers who usually wait for spring to emerge?

“Should the uptick in new listings persist, inventory levels could continue to improve as hesitant buyers and sellers make their move ahead of the flurry of activity in the spring,” notes Realtor.com® economic research analyst Hannah Jones in her analysis.

We’ll explain what the newest housing market data of 2024 means for everyone in the real estate game in the latest installment of “How’s the Housing Market This Week?”

The mortgage rate outlook

Where mortgage rates land week to week continues to be the main engine that drives the housing market. When rates drop, the market revs up as housing becomes more affordable.

Case in point: “Mortgage rates have fallen more than a percentage point from their recent peak, encouraging some buyers to re-enter the market,” says Jones. (Rates hit a 20-year high of 7.79% last October.)

Last week, more aspiring buyers applied for mortgages as a result of the lower rates, according to the Mortgage Bankers Association. (This was compared to the preceding week.)

What happens next with mortgage rates next is anyone’s guess. Yet there are reasons to be hopeful.

While mortgage rates are not tied directly to the Federal Reserve’s rates, the two often move in tandem. If the Fed continues to keep rates stable as they work toward the goal of 2% target inflation, “a more favorable housing market” may come into focus, according to Jones. If the Fed lowers its rates, mortgage rates could come down.

“Over the last couple of weeks employment and inflation data came in relatively strong, suggesting that the Fed will likely opt to hold the policy rate steady in their upcoming meeting,” says Jones.

Home prices remain stubbornly high

Mortgage rates are down and inventory is up, so what could put a damper on a homebuyer’s plan? Stubborn home prices, which hovered at a median of $410,000 in December.

Listing prices ticked up by 1.9%, compared to the same time last year, for the week ending Jan 13.

“This growth rate is the second highest seen since May, after a period of price declines from June to July,” explains Jones.

But there is good news amid the bad.

“The nation’s median listing price has been declining seasonally,” says Jones, adding that it “typically bottoms out in the first week of the year, and then starts to climb as spring comes into view.”

A look at listing pages

The number of homes for sale is not only on the rise but is hitting bona fide streaks now that sellers aren’t as constrained by the mortgage lock-in effect. This refers to homeowners not wanting to put their homes on the market and purchase new ones because they locked in meager rates during the pandemic.

For the 12th week in a row, the number of new listings has risen year over year. They were up by 7.0% for the week ending Jan. 13 from the same period one year ago.

Meanwhile, active listings (a combination of new and old listings) for the same week grew by 7.9% compared to the previous year. That was a 10-week streak of annual growth.

“Though inventory remains below the 2023 peak, seller activity has picked up and promises more options to home shoppers,” says Jones.

Consider buying or selling before spring

The generally hot spring housing market is about 60 days away, but intrepid buyers (and sellers) might want to make moves now.

Homes spent four fewer days on the market for the week ending Jan. 13, compared to the same week a year ago. (In December, homes spent an average of 61 days on the market.)

This faster pace of sales marks more than three months of homes being snapped up in less time than the same week in the previous year.

“The lower time spent on the market has been driven by more newly listed homes as a share of overall available inventory, as well as scarce inventory in general, as buyer demand is funneled into fewer homes for sale,” says Jones.

Bottom line? Buyers and sellers will likely face even more competition in the spring.