A few months ago, we delineated the reasons that listings would start to grow after several years of real estate purchase prospects not being able to find a house. These reasons included long-term demographic factors such as baby boomers wanting to age in place, but finally aging out of their homes. They also included short-term factors such as life happenings including millennials getting married and having kids — and discovering that their first-time ownership condo does not fit anymore.

Sure, the rise in listings was delayed by the “lock-in” effect. So many potential sellers had low mortgage rates and they did not want to sell into a market which would require a subsequent purchase at a much higher rate. In reality, we are now seeing that these higher interest rates are working in favor of more listings. How? Higher rates have suppressed purchase demand enough that the organic growth in listings is now higher than the growth in demand. In addition, as time goes on, fewer and fewer homeowners have mortgage rates less than five percent.

Thus, for sale signs are now proliferating in many areas around the country. We are moving from a strong sellers’ market to a more balanced market. It is not quite a buyers’ market. Rates have started to fall a bit from their highs and the next question is — will lower mortgage rates increase buyer demand enough to swing the market back to the seller side? That will depend upon how quickly they fall. With the Federal Reserve meeting next week, we would speculate that the Fed is aware of this possibility and would be in favor of a more gradual easing of interest rates to avoid stoking the flames of housing inflation through higher house prices. For now, the balance seems to be about right.