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Why housing inventory may improve this winter

Buying a home this winter may make more sense than usual. Getty Images

Buying a house can be a difficult process no matter what the timing is. Still, many people subscribe to the conventional wisdom that it's much harder to buy a house in the winter

That's because there are generally fewer homes available during the winter, as many people prefer not to move during the colder months. This year, however, changes to the interest rate market may mean increased housing stock — and increased competition. 

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Why housing inventory may improve this winter

If you're in the market for a house, you might be tempted to wait until the spring when the housing market generally perks up. This year, though, you may want to start looking to buy a home right away, even as cold weather settles down across much of the country. Here's what you need to know.

Housing stock is typically low in the winter

There is often lower housing stock available in the winter months. For example, there were just over 346,000 active listings available in February 2022, according to data from the Federal Reserve. In August 2022, there were more than 726,000 active listings available. 

There are a few reasons why housing stock tends to dip in the winter. One is that fewer people want to complete the process of buying a house in cold weather. Buying a home typically means spending time outside while walking to different houses and checking out outdoor areas, which isn't ideal with snow on the ground.

Another reason is that many homebuyers have children and don't want to move during the school year to avoid a midyear change of schools. This makes buying a house between July and August preferable. Once people are ready to move, they list their existing homes, creating a spike in available units.

If you want to buy a home this winter, shop online for a mortgage that works for you.

Why this year could be different

There is one major reason why there might be more housing available in the winter months this year. After a long period of high interest rates on mortgage loans, mortgage rates are going down

On November 1, 2023, the average rate for a 30-year fixed-rate mortgage was 8.06%. For a 15-year fixed-rate mortgage, it was 7.20%. As of January 5, 2023, those numbers stand at 7.09% and 6.47%, respectively. 

And, there's a chance that even more mortgage rate drops could be coming, as the Fed has indicated it might make cuts in 2024. That would likely have a further impact on mortgage rates.

"Because rates are down from like 8% to below 7% now, there will be an uptick in inventory in January and February versus a downtick," says Nick Narodny, the founder and CEO of Aalto, an online homebuying platform.

One thing to be aware of is that this will mean that in addition to higher supply, there will be higher demand for available homes. 

"You're also going to have more buyers, just because the rate will be lower," says Narodny.

The best way to deal with this competition is to do your research and get preapproved for a mortgage so you're ready to close a deal.

The bottom line

While housing stock traditionally dwindles during the winter, there may be more houses available this year. That's because mortgage rates are dropping, meaning more people are in the market to buy a new home — which often requires selling their existing home first. With an increase in inventory, though, there generally is increased competition, so make sure to take steps to be prepared, including getting preapproved for a mortgage. 

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