Low inventory helped fuel soaring home sale prices that made housing affordability out of reach for many entry-level and first-time homebuyers.
Now, sellers have reduced asking prices, reflecting a change in the housing market.
"I would say it's easier now than, say, six months ago to potentially buy a home because the key to the market, the degree of the bidding wars, the number of bids per home for sale — those are all easing in the last few months, which makes it easier to get the home that you want than in times past," Mark Fleming, chief economist at First American, said on Yahoo Finance Live (video above).
U.S. mortgage rates are coming off multi-decade highs, with the 30-year fixed mortgage rate plunging to 5.3% this week, its biggest drop since 2008. While that drop is a relief for potential homebuyers, it doesn't mean the housing market has normalized yet.
"It's a little bit of relief, but it's not back to where rates were three or four or maybe five months ago," Fleming said. "And I think the demand in the market is really responding to the big change from then."
Though rates finally declined, mortgage application demand still did as well, which he said is indicative of the fact that rates are still high "relative to the anchored bias of all of us at 3% just a few months ago."
Adjustable-rate mortgage versus 30-year fixed mortgage
One option for homebuyers still in the market is to consider an adjustable-rate mortgage (ARM) over the traditional 30-year fixed mortgage.
"There's been a big increase in the shifting from the 30-year fixed to the adjustable-rate mortgage in order to recapture some of that affordability back from the otherwise high rates for the traditional 30-year fixed rate," Fleming said.
Currently, an ARM rate is roughly a percentage point lower than that of the 30-year fixed mortgage.
“Most homebuyers don't live in their homes for 30 years and move on a more regular basis,” Fleming said. “Paying the premium to fix a mortgage for 30-years doesn't actually make that much rational sense compared to fixing it only for five, or seven, or 10 years, more in line with your likely length of tenure in a home.”
Aside from deciding between an ARM or 30-year fixed mortgage, homebuyers should consider several additional factors when it comes to deciding if it's the right time to actually buy a house, he said.
"You buy a home not for the investment opportunity, not for the return relative to a stock or a bond," Fleming said. "You buy a home to live in it. And so, the decision about when is a good time to buy is less financial as much as it is about your lifestyle, the things that are going on, whether you're forming a family, things like that. Those are the primary drivers."
Ronda is a personal finance senior reporter for Yahoo Money and attorney with experience in law, insurance, education, and government. Follow her on Twitter @writesronda.