Increased Buyer Leverage May Bring More Mortgage Applications to Lenders
Written By: Joel Palmer, Op-Ed Writer
Housing and mortgage experts are beginning to see a market shift in favor of buyers but remain cautious as to whether that will bring more originations for mortgage processors and underwriters.
National real estate brokerage Redfin reported last week that the U.S. housing market tilted in favor of buyers for the first time this decade in January. The 3.7 months of for-sale inventory was the highest in six years.
“Historically, a buyer’s market has been defined as when months of supply reaches 4-6 months—but old definitions don’t fit the reality of today’s market,” said Redfin Economics Research Lead Chen Zhao. “Many buyers don’t feel like they are in a buyer’s market, with home prices at near-record highs and mortgage rates elevated. But we are more than halfway through the decade and this is the first time we can say that buyers have as much, if not more, power than sellers.”
The National Association of Realtors reported a 3.5 month supply of unsold inventory in January, with the total number of available units up nearly 17 percent from a year ago. While total existing sales dropped 5 percent from December 2024, they improved 2 percent on a year-over-year basis.
More positive trends for buyers, according to Redfin data, include:
Pending sales fell 6.3% in January to the lowest mark since the early days of the pandemic in April 2020.
The typical home sold in January had been on the market for nearly two months (56 days), the longest period since February 2020.
The median U.S. home price was up 4.1 percent year over year in January, the slowest growth since September and more in line with the rate experienced in the late 2010s.
The typical home sold for 1.8 percent less than its final asking price in January, the biggest discount in nearly two years.
Home purchases were canceled at the highest January rate since at least 2017.
Zhao cautioned that even though the pendulum may have swung in favor of buyers, these conditions may not last long. More buyers may start to move off the sidelines when they realize there’s more inventory available.
The National Association of Realtors is also cautious whether there’s enough buyer leverage to move the needle.
”Mortgage rates have refused to budge for several months despite multiple rounds of short-term interest rate cuts by the Federal Reserve," said NAR Chief Economist Lawrence Yun. "When combined with elevated home prices, housing affordability remains a major challenge.”
While the increased supply favors “strongly qualified buyers,” Yun said, mortgage rates will need to come down further to prompt other buyers, including first-time homeowners.
Fannie Mae said in its latest monthly economic commentary that “plausible scenarios” exist for both upward and downward movement in mortgage rates this year. Fannie’s economists expect mortgage rates to remain volatile this year as markets react to trade policy announcements, incoming economic data, and other fiscal policy changes.
“Higher mortgage rates would exacerbate the existing ‘lock-in effect’ and worsen affordability, which may then weigh on home sales and mortgage originations activity,” said Kim Betancourt, Fannie Mae Vice President of Multifamily Economics and Strategic Research. “Of course, if mortgage rates move lower, we’d likely see an improvement in affordability and a corresponding pickup in housing activity.”
Fannie made a slight upward revision in its 2025 forecast for single-family purchase mortgage originations, due to recent data on existing home sales. Conversely, Fannie lowered its forecast for refinance originations due to the current and predicted rate environments.
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
