Welcome to the housing market’s ‘new normal’ — 7% mortgage rates and all

Mortgage rates are high and housing inventory is tight, but some experts see the market’s deep freeze starting to thaw this spring.

Homebuying started to pick up during and after the holidays. Existing home sales increased 3.1% from December to January, according to the National Association of Realtors. Meanwhile, the inventory of unsold existing homes rose 2% from December to January, totaling around 1 million at the end of last month, slightly expanding buyers’ options.

“While home sales remain sizably lower than a couple of years ago, January’s monthly gain is the start of more supply and demand,” NAR chief economist Lawrence Yun said in a news release Thursday.

“This might be the market’s first steps toward a ‘new normal’– a world where inventory remains rather scarce by pre-pandemic standards, but buyers are not exactly swarming the doorway of every open house like in 2021 and early 2022,” Zillow senior economist Jeff Tucker wrote in a blog post last week.

“More revived supply should help meet the returning demand, and head off the risk of renewed overheating,” he said.

For the last few years, limited housing inventory and low rates have put the housing market on ice. Many homeowners who’d otherwise be eager to sell have hesitated to shake off the so-called golden handcuffs of mortgage rates as low as 2% or 3%.

That’s finally starting to change, experts say — even though rates are now much higher, climbing again past 7% in recent weeks.

“Markets are just kind of recalibrating for the reality that the Fed is not going to cut interest rates right away,” said Greg McBride, Bankrate’s chief financial analyst. For many buyers and sellers alike, it’s beginning to sink in that “we’re not going back to three and four