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While mortgage-rate movement can be a helpful guide for future activity, to get a full picture of what’s actually happening in the real-estate market, you need to look at two data points: inventory, or the number of available homes on the market, and new listings, or the number of homes hitting the market. Olsen, the Zillow economist, likens inventory to a swimming pool and new listings to the spigot that keeps water flowing — as with any pool, too full or too empty is a problem. A balanced market is one in which there are enough new homes to meet the demand from buyers, but not so many that prices plummet. We’re still a long way from refilling the pool of homes on the market: Inventory in September was down by about 23% from pre-pandemic levels, according to Realtor.com. But there is clear improvement taking place here, too. The number of active listings in September was up by 34% from the same month a year ago, increasing to its highest level since April 2020. The number of homes newly listed for sale in September was also up by 11.6% from last year. By slowing down home sales, higher rates have given inventory time to build back up from pandemic lows — homes are lingering on the market longer with fewer buyers, so the pool’s water level has steadily climbed.
More homes to choose from, lower mortgage rates — that’s a “powerful combination,” said Lawrence Yun, the National Association of Realtors’ chief economist, adding that sales should move higher in the coming months as a result. Buyers can take heart in another data point, which is that far fewer homes are being snapped up as soon as they hit the market. According to the housing-data firm Altos Research, there were about half as many “immediate sales” in late September as there were in 2022. “It looks like that frenzy is finally gone,” Altos’ president, Mike Simonsen, said in a recent video update.
There won’t be dancing in the streets, but it would be a marked improvement from the past couple of years.
The baseline expectation for the spring, the Redfin economist Chen Zhao told me, is a modest uptick in sales and new listings. Most economists don’t expect mortgage rates to fall dramatically, meaning sellers will slowly start to reenter the market as they decide it’s time to make a change. New listings this year increased by about 5% a month on average compared with the same months in 2023 — you might expect to see that climb a little next year, Zhao told me, to maybe 10% year-over-year growth. The total number of homes on the market each month tended to be about 10% or 15% higher than last year, but you might see that rise to 20% or 25% when you compare 2025 with this year. This is the housing’s version of a soft landing; there won’t be dancing in the streets, but it would be a marked improvement from the past couple of years.
“Even though the housing market is recovering, the recovery is going to be very slow,” Zhao told me. “We’re not going to see anything like the activity that we saw in 2021 or 2020 — or even 2019, 2018 — for a while.”
Still, if buyers are feeling better about their prospects, that should grease the wheels of America’s housing market.
It is important to note that forecasts are just forecasts. There’s a lot that could change in the next year. The strength of the job market is a big question mark — people won’t move if they don’t feel sure about their next paycheck. There are huge regional differences to consider here, too. Builders have finished a lot more new housing in Sun Belt states in the lower half of the US, for example, which has made it harder for homeowners there to sell at their desired prices than for their counterparts in the Midwest or the Northeast. Affordability is still a huge pain point. An August survey by Fannie Mae suggested consumers were feeling remarkably optimistic about the future of mortgage rates, but only 17% of respondents said it was a good time to buy a home. Any one of these issues could chill the market and slow America’s exit from the Ice Age.
That said, it’s impossible to ignore the signs of a shift underway. Mortgage rates are a key piece of the equation. I’ll also be keeping a close eye on inventory and the pace of new listings hitting the market, which should heat back up starting around February and March. But all this focus on the numbers can obscure the simple fact that people have to move for all kinds of reasons that have nothing to do with a few digits and a percent sign.
I recently spoke with Mark Palim, the chief economist at Fannie Mae, who left me with a salient piece of advice: “Leave timing the bond market to the hedge-fund guys.” In other words, trying to predict mortgage rates — and buying or selling a home accordingly — is a fool’s errand. Budgets matter, absolutely, and monthly payments are a crucial consideration for any buyer. But buyers and sellers should remember that their home isn’t just an investment vehicle or a bet on where the economy is headed. At the end of the day, you have to live in it.
“All sorts of things can happen,” Palim told me. “Rates may move. Home prices may go up, home prices may go down. But would you be happy living there for a while? Does it meet your needs?”
James Rodriguez is a senior reporter on Business Insider’s Discourse team.