The Real Estate Market Is Finally Starting to Thaw – Here's What You Need to Know



It’s been a tough couple of years for the real estate market, with both buyers and sellers feeling stuck. Homes sat on the market as buyers were put off by high prices, and wild mortgage rate fluctuations kept many on the sidelines. But according to housing experts, the market is finally showing signs of change — a “thaw” in the real estate Ice Age is on the horizon.

A Shift in the Air

Mortgage rates are near their lowest point in two years, which could encourage more sellers to put their homes on the market. At the same time, the inventory of available homes is the highest it’s been since the early days of the COVID-19 pandemic. While home prices are still higher than last year, the increase is modest (around 3-5%), which is more typical of a healthy, balanced market.

If this trend continues, the coming spring could bring more activity as buyers and sellers start to feel more confident.

It’s Not All Sunshine Yet

While things are looking up, the housing market is far from “back to normal.” Buyers and sellers are still feeling the effects of the past few years, where high prices and stretched budgets made real estate moves difficult. However, the recent positive signals offer a glimmer of hope that we’re moving in the right direction.

One challenge that remains is what Zillow’s chief economist Skylar Olsen calls the “musical chairs” problem. Many people want to move, but they’re hesitant because they can’t find new homes, which keeps everyone stuck in place. This is largely due to the "lock-in effect," where homeowners who secured ultra-low mortgage rates during the pandemic are reluctant to give them up for higher rates.

The Impact of Mortgage Rates

Mortgage rates spiked after hitting record lows during the pandemic. Even though rates have recently dropped from their two-decade high, they’re still about twice as expensive as they were just a few years ago. This makes monthly payments significantly higher, keeping many potential buyers on the sidelines.

But here’s the good news: The average 30-year mortgage rate has dropped from 7.2% in May to about 6.1% in October. And experts predict it could fall even further next year. Some forecast that rates could dip to 5.7% by the end of 2025, a level many buyers are comfortable with.

What This Means for Buyers and Sellers

While mortgage rates are a major factor in the housing market, they’re not the only piece of the puzzle. Inventory (the number of homes available for sale) is another key factor. Right now, there are more homes on the market than we’ve seen in a while, which is good news for buyers. But inventory is still down about 23% from pre-pandemic levels, meaning there’s room for improvement.

Still, the number of newly listed homes has been rising steadily, and experts expect this trend to continue. With more homes to choose from and lower mortgage rates, the market could gain more momentum as we head into spring 2025.

Bottom Line

The real estate market is slowly recovering, but don’t expect a dramatic shift overnight. Buyers and sellers are starting to reenter the market, but the recovery will likely be gradual. While it’s tempting to try and time the market, it’s important to remember that real estate decisions aren’t just about numbers. At the end of the day, a home is where you live — not just an investment. So if you’re ready to move and the home meets your needs, it might be time to jump in.

Original article: The turning point for America's real estate market is finally here

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