The housing market may finally be thawing as mortgage rates and housing inventory improve

• Mortgage rates eased for the first time in five weeks, Freddie Mac said Thursday.
• At the same time, newly listed homes climbed 13% year-over-year in the four weeks to March 3.

The US housing market has been mostly frozen since the pandemic boom, but fresh data out Thursday suggests signs of a spring thaw.

Freddie Mac reported that rates on the most popular home loan fell for the first time in five weeks to hit 6.88%, down from 6.94% the prior week. At the same time, the number of newly listed homes in the four weeks to March 3 spiked 13% compared to one year ago.

Easing borrowing costs and an uptick in available inventory together offer a welcome signal for Americans seeking homes. It also points to a softening of the "lock-in" effect — current owners being unwilling to move or refinance at higher interest rates — that's kept housing market activity muted. It wasn't long ago that house hunters and current owners could lock in a 3% rate on their mortgage.

Indeed, an uptick in demand was evident in Freddie Mac's latest report, as mortgage applications rose for the first time in six weeks amid the dip in rates.

"Mortgage rates continue to be one of the biggest hurdles for potential homebuyers looking to enter the market," Sam Khater, Freddie Mac's chief economist, said in a statement. "It's important to remember that rates can vary widely between mortgage lenders so shopping around is essential."

Mortgage rates have dipped this week amid the renewed outlook for rate cuts this year, as Fed Chair Jerome Powell testified to Congress that the central bank is still looking to loosen monetary policy in 2024.

Meanwhile, Realtor.com on Tuesday reported that February saw 339,370 homes for sale, roughly an 11% increase compared to the same month in 2023. While that's still about 17% below pre-pandemic levels in 2019, the upward trend is there.

However, Capital Economics strategists wrote earlier in the week that easing mortgage rates won't be enough to spark a meaningful, lasting rebound in home demand. The research firm expects house prices to climb 5% in 2024, which is above the consensus forecast of 3%.

"Even if mortgage rates fall to 6% as we expect, mortgage rate 'lock in' will continue to curb home moves," Capital Economics strategists wrote in a note. "As a result, we only anticipate a trickle of new resale supply coming onto the market over the next few years."