What to expect from housing market in 2025
Corey Burr with Southeby’s International Realty joined LiveNOW’s Josh Breslow to talk about what to expect with the housing market in the new year.
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LOS ANGELES – The average U.S. mortgage rate dropped for the fifth straight week, offering a slight break for potential homebuyers as the spring homebuying season approaches.
According to mortgage buyer Freddie Mac, the 30-year fixed mortgage rate fell to 6.85%, down from 6.87% last week. This is the lowest level since late December and a slight drop from 6.9% a year ago.
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The 15-year fixed-rate mortgage, often used by homeowners refinancing their loans, also declined to 6.04% from 6.09% last week.
While the drop in rates is a welcome sign for home shoppers, affordability remains a major issue due to rising home prices and high borrowing costs. Many buyers continue to wait for conditions to improve before entering the market.
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Why are mortgage rates falling?
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What they’re saying:
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The decline in mortgage rates comes at a time when home sales are still at historic lows. Sales of existing homes in the U.S. fell in 2023 to their lowest level in nearly 30 years, continuing a slowdown that began when rates surged from pandemic-era lows.
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Despite lower rates, mortgage applications fell 5.5% last week, according to the Mortgage Bankers Association (MBA). The drop suggests that many potential buyers are still holding off due to high home prices and limited supply.
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FILE – A for sale sign is displayed outside of a home for sale on August 16, 2024 in Los Angeles, California. (Photo by PATRICK T. FALLON/AFP via Getty Images)
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“Purchase activity was higher than year-ago levels, but many prospective homebuyers are waiting for supply and affordability conditions to improve meaningfully before jumping into the market,” said Bob Broeksmit, CEO of the MBA.
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Mortgage rates are influenced by several factors, including inflation, the Federal Reserve’s policies, and the bond market.
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Are lower mortgage rates boosting home sales?
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The latest drop in rates follows a decline in the 10-year Treasury yield, which lenders use as a benchmark for pricing home loans. The yield was at 4.79% a few weeks ago, reflecting concerns over inflation and economic policies under the Trump administration. It has since fallen to 4.5%, contributing to lower mortgage rates.
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Freddie Mac’s chief economist Sam Khater said the current stability in mortgage rates “bodes well for potential buyers and sellers as we approach the spring homebuying season.”
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What’s next:
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While mortgage rates have dipped, they are still significantly higher than the record lows seen during the pandemic. Many experts believe rates will remain volatile, influenced by Federal Reserve decisions and economic trends.
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For now, prospective homebuyers should watch for further rate changes and consider locking in a rate if conditions become favorable.
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The Source: Reporting from Freddie Mac, Mortgage Bankers Association, and the Associated Press.
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