Housing Inventory Usually Picks Up in Spring. Will That Happen This Year?

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Winter tends to be an unpopular time to list a home. After all, it's hard to show off your house's curb appeal when there's snow and slush on the ground.

Spring, on the other hand, is when real estate listings tend to pick up. The weather is warmer so grass can thrive and flowers can start to bloom, and showing off landscaping becomes a lot easier.

Spring is also a season that coincides with the end of the school year. For many families, it's easier to deal with moving during the summer than during the academic year, so listing in spring tends to help that timing work out.

This year, however, home buyers are unlikely to experience a spring season inventory boom. And there's a big reason for that.

Elevated mortgage rates are keeping homeowners from selling

Housing inventory has been sluggish in general over the past year or so. And that trend is likely to continue throughout the spring season for one big reason -- expensive mortgages.

As of this writing, the average 30-year mortgage rate is 7.22%, according to Freddie Mac. But many existing homeowners are sitting on much lower mortgage rates, either because they locked in a lower rate to begin with or because they refinanced in 2020 or 2021 when rates were down.

In fact, in 2020 and 2021, borrowers with strong credit could sign a 30-year mortgage or refinance at around 3%. To swap a loan like that for a mortgage rate above 7% is highly unappealing, which explains why so many people may be hesitant to sell.

There's a reason to be hopeful that inventory will increase

We may not see housing inventory increase very much this spring. But in the next year, we could see a slow but steady uptick in real estate listings.

The reason? Mortgage rates are stuck where they are largely due to interest rate hikes from the Federal Reserve. But the Fed is expected to start cutting rates at some point later this year. Once that happens, mortgage rates should start to retreat.

Now, we may not see a huge uptick in home listings overnight once those rate cuts happen. But in time, mortgage rates could fall to a palatable-enough level to make homeowners interested in selling again. So if you're hoping to buy, you may just need to sit tight a bit longer.

That said, it pays to take steps to put yourself in the best possible position to buy a home once inventory picks up and you're able to find a place you like. Make an effort to pay all bills on time to boost your credit score. You can also review your credit report for errors to make sure there's not incorrect information working against you.

At the same time, take the opportunity to boost your savings so you have more money to put toward a down payment. That could help keep your mortgage payments lower and more affordable.

The good news is that the Fed's string of interest rate hikes have led to higher rates in savings accounts. So if there aren't currently any homes on the market that meet your requirements, take comfort in the fact that it's not a bad time to have your down payment funds parked in the bank while you wait for inventory to increase.

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