After two years of rising mortgage rates, tight inventory, and steep home prices, there are signs the housing market may finally be shifting. A modest but meaningful drop in mortgage rates over the past few months has sparked renewed buyer activity in several parts of the country.
In California, February home sales hit a two-year high, according to a new report by the California Association of Realtors (CAR). This early shift could be a signal of what’s to come nationwide, especially if borrowing costs continue to ease and more homes are listed for sale in the coming months.
A Look at California: An Early Indicator?
California’s housing market has long been one of the most competitive—and expensive—in the country. For much of the past five years, the state has struggled with affordability challenges driven by high prices, rising interest rates, and limited inventory. According to the California Association of Realtors (CAR), home sales in January 2025 were at their lowest level in over a year, raising concerns that the market might be stalling entirely.
But February brought a notable shift. CAR reported a seasonally adjusted annualized rate of 283,540 existing single-family home sales—a jump of 11.6% from the month prior and 2.6% year over year. For the second month in a row, more homes are hitting the market compared to last year, and it’s probably because falling mortgage rates are giving sellers more confidence or flexibility to make a move. This trend could have a ripple effect across other states. As California often sets the tone for housing trends, increased inventory and buyer activity in that market may hint at similar movement in other high-cost or inventory-constrained regions.
What’s Driving the Change?
The biggest factor in the turnaround appears to be interest rates. While mortgage rates remain elevated compared to pandemic-era lows, they have declined from recent peaks. Even a modest drop in rates can significantly affect affordability, especially in markets where home prices remain high.
Buyers who were previously priced out by higher borrowing costs are now revisiting their options. At the same time, homeowners who locked in ultra-low rates during the pandemic are starting to feel more confident about listing, especially if they’re motivated by lifestyle changes or equity gains.
Could This Be a Turning Point?
While it’s too early to call this a full market recovery, the data suggests a shift in direction. If this trend continues with lower rates and increased listings, buyers could experience more favorable conditions as we approach the summer and fall. Even if mortgage rates stay within the 6-7% range, more stable rate movements and increased inventory could make homeownership more achievable for a larger number of Americans.
With fluctuating mortgage rates and changing inventory, buyers and sellers need guidance on how to make the most of their options. A trusted lender can provide valuable insights on rate trends, offer tailored loan products, and help buyers feel more confident in their decision-making.
By working closely with lenders, agents can ensure that their clients have the most up-to-date information and access to the best financing options, ultimately making the home-buying and selling process smoother and more successful for everyone involved.
How You Can Support Prospective Buyers Right Now
As a real estate agent, one of the most valuable things you can do for your buyers right now is help them stay financially ready and emotionally confident to act when the right home comes along.
Here’s How You Can Guide Your Clients and Set Them Up for Success
Encourage Early Conversations With a Lender
The more time we have to assess credit, income, and affordability, the better we can position buyers when opportunities arise. Even if they’re still six months out, a pre-qualification or pre-approval can help them set realistic expectations and strengthen their offer when the time comes.
Stay Proactive When Rates Shift
Reach out to your buyers when we see rate movement, even if it’s temporary. We’re happy to provide updated estimates or scenarios so you can help your clients reassess what’s possible.
Educate Around Affordability Tools
We can walk your clients through options like temporary buydowns, lender-paid closing costs, and rate-lock programs that could make a purchase more manageable in today’s environment.
Highlight Inventory Trends
In markets like California, we’re seeing inventory slowly grow—offering more choices for buyers and easing some of the pressure. That balance between more options and slightly better affordability could help reluctant buyers feel ready to jump in.
By teaming up to prepare buyers early and provide clear guidance on financing options, we can help more clients move confidently toward homeownership—even in a shifting market.
How You Can Help Sellers Navigate the Current Market
For your clients looking to sell, or perhaps sell and then buy, it’s an important time to provide clear guidance on how changing conditions affect pricing strategy, timing, and buyer demand.
Here’s How You Can Support Sellers Right Now, With Insight From the Lending Side
Reinforce the Benefit of Motivated, Rate-Ready Buyers
With more pre-approved buyers re-entering the market when rates dip, pricing a home correctly from the start is essential to attracting serious offers. We’re seeing many buyers pause due to affordability concerns, so sellers who stay flexible and realistic on price are more likely to succeed.
Leverage Buyer Incentives Strategically
If a seller wants to stand out, consider suggesting a seller-paid rate buydown or closing cost credit. These tools can expand the buyer pool without requiring a price cut and can be a win-win for both sides.
Time Listings to Align With Buyer Optimism
Buyer activity tends to pick up with positive rate trends or increased inventory. If your seller is on the fence, now is a good time to prepare their home for listing while buyer confidence is rebuilding.
Manage Expectations on Competition and Pricing
With more homes hitting the market, sellers need to understand they may no longer be the only option in their neighborhood. A solid pricing strategy, supported by market comps and buyer behavior insights, can help them avoid sitting too long or making costly reductions later.
Aligning Seller Expectations with Buyer Realities: How Keller Home Loans Helps You Navigate Market Shifts with Confidence
Sudden shifts in the housing market don’t have to catch you or your clients off guard. By watching for early indicators, setting clear expectations, and adjusting your strategy, you can lead with confidence and deliver real value in any market.
Whether the market favors sellers or buyers, Keller Home Loans is here to support you and your clients every step of the way—with personalized guidance, fast pre-approvals, and flexible loan options designed for today’s buyers.
When we work together to align seller expectations with buyer realities, we help create smoother transactions and stronger client satisfaction on both sides of the deal.
Reach out to your local Keller Home Loans team today to learn how we can help your clients thrive in a changing market.
