Mortgage rates edged lower in February, potential good news for the spring homebuying season.

Price growth has slowed from double digits during the pandemic to 4%-5% a year, close to the same growth rate as before 2020. Still, the median U.S. home price sits well above $400,000, and elevated mortgage rates make monthly payments increasingly difficult.

In late January, Federal Reserve officials voted to hold baseline interest rates between 4.25% and 4.5% interest rates steady, citing stubborn inflation. Both consumer and producer prices came in higher for January. While the Fed doesn’t directly set mortgage rates, its rates affect consumer loans, including mortgages. Mortgage rates are driven by multiple other factors, including the 10-year Treasury yield, inflation and the overall health of the economy.

However, traders parsing this data saw reason for optimism. Falling prices in key sectors like health and airfares suggested inflation might not be too severe, driving bond yields lower. The yield on the 10-year Treasury bond and mortgage rates usually move up and down together. Lower post-holiday retail sales underscored the belief in a cooling economy.

Today’s housing market is slower mostly because it’s so expensive. Continuing high home prices and elevated mortgage rates have pushed monthly payments near record highs. However, more homebuyers may come out of the woodwork as they become accustomed to the reality of higher rates.

Redfin’s February Homebuyer Demand Index – a measure of tours and other buying services from Redfin agents – was up slightly from the six-month low it dropped to in late January.

As of Feb. 19, the number of homes for sale stood at more than 1.55 million nationwide, up 11.7% from one year prior. There are now five months of for-sale supply on the market, up from 4.4 months a year earlier and the most since early 2019. Buyer activity has not quite kept up with seller activity, leading to this slight buildup, but more buyers will likely enter the market as the weather warms and the spring nears.

Discount prices are becoming more typical. In January, the average U.S. home sold went for 1.8% less than its asking price, the biggest discount in nearly two years. More than 19% of homes had price drops, up from 15.% in January 2024.

Price growth has slowed from double digits during the pandemic to 4%-5% a year, similar to the growth rate before 2020. Still, elevated mortgage rates make monthly payments increasingly difficult.

The typical home that sold in January was on the market for 56 days. Pending sales were down 6%. New listings were up 7.4% from the same time last year.