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The final week of February is filled with important economic reports that could influence the Federal Reserve’s next moves on interest rates. Investors, homebuyers, and market analysts will be paying close attention as data on inflation, housing trends, and economic growth is released. These reports will provide insights into the direction of interest rates, mortgage affordability, and the overall health of the economy.

Key Economic Reports This Week

The Personal Consumption Expenditures (PCE) inflation index, the Federal Reserve’s preferred measure of inflation, will be released on Friday. This report is critical in determining whether inflation is slowing, which could impact future interest rate decisions. If inflation cools more than expected, it may increase the likelihood of interest rate cuts later in the year.

Several important housing market updates will also be released throughout the week. On Tuesday, home price appreciation data will provide insight into whether home values are rising or stabilizing. On Wednesday, the January New Home Sales report will give a clearer picture of demand for new construction. On Thursday, the Pending Home Sales report, along with the latest Jobless Claims data and the second estimate of fourth-quarter 2024 GDP, will offer a more comprehensive view of economic growth and labor market conditions. Any signs of weakness in the labor market or slowing economic growth could put downward pressure on mortgage rates, making homeownership more affordable.

Full Calendar of Market-Moving Events

• Tuesday: CB Consumer Confidence Report
• Wednesday: Nvidia ($NVDA) earnings report, a potential market-moving event due to Nvidia’s influence on the technology and artificial intelligence sectors
• Thursday: Second estimate of Q4 2024 GDP, which could impact interest rate expectations
• Friday: January PCE Inflation Report, the most critical data point for the Federal Reserve’s inflation outlook
• Throughout the week: Over 10 scheduled speeches from Federal Reserve officials, which could provide additional insight into future policy moves

With such a packed schedule, this week’s economic data could have a significant impact on housing, mortgage rates, and financial markets.

US Housing Market Slows as All-Cash Purchases Decline to a Decade Low

The United States housing market continues to slow, with all-cash home purchases reaching their lowest level in a decade. The total number of all-cash transactions fell by 60,469 in 2024, bringing the total to 700,445. Over the past three years, cash transactions have declined by 35 percent, with 383,093 fewer homes purchased using cash.

Housing turnover also reached a historic low in 2024, with only 25 out of every 1,000 homes changing hands. This marks the slowest pace of home sales in more than 30 years. For comparison, during the peak of the post-pandemic housing boom in 2021, turnover reached an all-time high of 40 out of every 1,000 homes sold.

Despite the decline in total purchases, all-cash transactions still accounted for 33 percent of all home sales in 2024, the second-highest share in a decade. This suggests that while the overall number of home sales has dropped, a significant portion of buyers are still choosing to pay in cash, likely to avoid high mortgage rates.

Factors Contributing to the Decline in All-Cash Sales

Several factors have contributed to the reduction in all-cash home purchases. High mortgage rates have reduced overall housing demand, making it less attractive for investors and cash buyers. Although cash buyers do not need financing, the broader slowdown in the market affects pricing and the availability of desirable properties.

The low inventory of homes for sale has also played a role. Many homeowners are choosing to hold onto their properties rather than sell, largely because they secured historically low mortgage rates in previous years. This “lock-in effect” is keeping inventory tight and reducing overall housing turnover.

Investor activity has also declined. Many institutional investors, who frequently purchase homes with cash, have retreated from the market due to slowing home price growth and shrinking profit margins. Additionally, affordability remains a challenge even for cash buyers, as home prices remain elevated compared to income levels.

Will Cash Buyers Return?

If the Federal Reserve begins cutting interest rates later this year, the housing market may see an increase in sales activity. However, for cash buyers to return in large numbers, affordability will need to improve, and inventory levels must rise. Until then, the market is likely to remain slow, with cash transactions declining and home sales at multi-decade lows. The coming months will determine whether 2024 marks the bottom of the housing slowdown or if further declines are ahead.

Mortgage Rates Are Dropping – What It Means for Buyers

Mortgage rates have declined in recent weeks, raising the question of whether homebuyers will take advantage of the improved affordability. On February 21, the average 30-year fixed mortgage rate dropped to 6.9 percent, marking the lowest level since mid-December. Although this decline is modest, it is enough to give buyers slightly more purchasing power.

How Lower Mortgage Rates Improve Affordability

A homebuyer with a $3,000 monthly budget can now afford a $446,000 home at a 6.9 percent mortgage rate. Just nine days earlier, when rates were at 7.1 percent, the same buyer could only afford a $439,000 home. This represents an increase of $7,000 in purchasing power simply due to a small drop in interest rates.

For additional context, the monthly mortgage payment on a median-priced U.S. home, currently valued at approximately $420,000, has fallen to $2,760. Two weeks ago, the same home would have cost $2,814 per month in mortgage payments. While these declines may seem small, they can add up to substantial savings over the life of a loan.

Why This Matters for Homebuyers

Redfin economists expect mortgage rates to remain in the high-6 percent to low-7 percent range for most of 2024. This means that the recent decline to 6.9 percent could present a brief opportunity for homebuyers to secure a more affordable mortgage before rates increase again.

More housing inventory is also becoming available in certain markets, giving buyers greater negotiating power. In some areas, buyers can negotiate better prices and more favorable terms, which was nearly impossible during the competitive housing market of the past few years. However, in high-demand regions such as the West Coast and Northeast, inventory remains tight, limiting negotiating power.

What Is Driving the Decline in Mortgage Rates?

Several factors have contributed to the recent drop in mortgage rates. Economic growth concerns, particularly fears of a slowdown due to potential policy changes in a second Trump administration, are weighing on investor sentiment. Tighter immigration policies could slow labor force growth, tariffs may increase costs for businesses and consumers, and potential federal layoffs could weaken economic momentum. These factors have contributed to lower Treasury yields, which influence mortgage rates.

The Bottom Line for Buyers

While mortgage rates have not dropped dramatically, even small declines can make a meaningful difference in home affordability. Buyers who have been waiting for rates to fall may want to take advantage of the current opportunity, as rates could easily rise again in the coming weeks or months. With additional inventory in some regions, buyers also have a better chance of securing a favorable deal.

Now is a good time for prospective buyers to explore their options, calculate affordability, and determine whether the current market conditions align with their homeownership goals.