Rates have stabilized — what does that mean for spring sales? 

While mortgage interest rates inched up this week, they have been relatively stable in the early part of 2024 — a contrast to the volatility of the past two years.

The 30-year fixed-rate mortgage averaged 6.69% this week, according to the latest Freddie Mac survey. That's up from last week's 6.6%. The 15-year fixed-rate mortgage jumped more significantly, rising from 5.76% to 5.96% in the past week.

The 30-year rate has hovered between 6.6% and 6.7% for more than a month following a sharp decline from October's near-8% peak.

So will rates stay in this range heading into the spring homebuying season? Most economists expect to see bigger declines at some point in 2024, but given the current strength of the economy — which could delay expected rate cuts by the Fed — that might not happen until later in the year.

In the short term, rates may continue to rise: In its daily survey, Mortgage News Daily put the 30-year average at 6.9% for Jan. 25.

"The Federal Reserve is now facing a new challenge: determining the optimal timing for a shift to rate cuts," said Realtor.com Economist Jiayi Xu. The Fed's dilemma, said Xu, is balancing the risk of a recession — a possibility if rate cuts are delayed — with a potential spike in inflation if rate cuts happen too soon.

But the rate debate could be moot if there aren't any homes to buy. Low inventory of existing homes continues to be a problem, which means the 2024 housing market will remain slow, Xu added.

Bright MLS Chief Economist Lisa Sturtevant agreed that inventory is a key factor. While up slightly compared to last year, inventory remains well below pre-pandemic levels.

"Opting for a townhome instead of a single-family home, looking at communities in different parts of the market, and considering homes with a rental stream are the types of decisions buyers are having to make," Sturtevant said.

New home sales show some strength

While there aren't enough existing homes to meet buyer demand, builders are getting more homes into the market. The U.S. Census reported that new home sales in December were at a seasonally adjusted annual rate of 664,000, which was 8% higher than November. Sales were also up 4.4% compared to December 2022.

"The new-home market has been a bright spot in an otherwise gloomy housing market," said Odeta Kushi, First American's deputy chief economist. "While the resale side will begin to enter recovery mode alongside lower mortgage rates, the new-home market will likely continue to outperform because builders can still offer incentives, while existing homeowners will still be held back by the rate lock-in effect."

Mortgage applications rise

Mortgage applications rose 3.7% last week, according to the Mortgage Bankers Association. It's the third consecutive week of increases.

The trend suggests that more buyers are taking advantage of stable mortgage rates and trying to secure a home before the market gets crowded this spring, said Joel Kan, MBA's vice president and deputy chief economist.

Still, purchase applications were 18% below last year's level, Kan noted.