Why the market is primed for a mini-rally this fall 

While the housing market remains in a holding pattern, it may be well-positioned for a mini-rally this fall season — if potential homebuyers are ready to come off the sidelines.

Several economic reports out this week show that housing inventory is at its highest level in more than four years, just as mortgage rates could potentially come down further — especially if the Federal Reserve decides to make a significant interest rate cut later this month.

The expectation is that the Fed will begin cutting rates as inflation returns to manageable levels to help the economy avoid a hard landing. How deep the first cut will be — and how many follow — will influence mortgage rates.

For now, however, investors are taking a wait-and-see approach. The 30-year mortgage rate, which is at its lowest level in 15 months, remained unchanged at 6.35% this week, according to Freddie Mac's latest survey. The 15-year rate continued to drop, now averaging 5.47%.

One thing investors are waiting for is Friday's August jobs report, said Sam Khater, Freddie Mac's chief economist. A weak jobs report could mean a further dip in the 10-year treasury rate, which influences mortgage rates.

That combo of declining rates and more choices could breathe life into what's been a sluggish housing market, said Realtor.com's Senior Economist Joel Berner.

With inventory up, buyers may be 'ready to get back in the game'

While supply varies by market, the overall trend shows inventory at its highest levels since May 2020, according to Realtor.com's August Housing Trends Report. A similar report from HouseCanary found that the gradual rise is bringing some normalcy back to the housing market.

"Buyers and sellers who have been sidelined from the market could just about be ready to get back in the game," said Jeremy Sicklick, CEO of HouseCanary.

Homebuyers who've been waiting for rates to drop may find more opportunities in the coming weeks, even if fall is busier than normal, said Danielle Hale, chief economist at Realtor.com. 

"The boost in activity is unlikely to overwhelm the usual seasonal slowdown. Shoppers who are out this fall are likely to face lower competition than is expected in spring 2025," Hale said.

The lower mortgage rates have led to more attractive monthly payments, according to Redfin. Its latest report found that even though home prices remain near record highs, the average monthly housing payment in the four weeks ending Sept. 1 is nearly $300 lower than April's all-time high. The median U.S. housing payment now sits at $2,534, according to the report.

Other signs of life

There are indications that buyers are out there, ready to make a move. Mortgage purchase applications rose 3% compared to the week prior and are now just 4% below levels seen a year ago, according to the Mortgage Bankers Association. Government-backed loans led the way, said Joel Kan, MBA's deputy chief economist.

Redfin's demand index, which includes homebuying services like touring, is at its highest level since May.

"There is demand for desirable, move-in ready listings, but some house hunters are in a holding pattern because the industry is in flux," said Van Welborn, a Redfin Premier agent in Phoenix.