HousingWireHousingWire
Mortgage rates have been static in the first month of 2025. The long-term costs of a home loan are keeping borrowers on the sidelines as rates have been above 7% since Christmas — the longest such stretch since July 2024 when they were in the middle of a long and steady decline.
But lenders and borrowers may notice some slight improvements. HousingWire’s Mortgage Rates Center shows that the average 30-year conforming rate was 7.14% on Tuesday, down 4 basis points (bps) in the past week. The average 15-year conforming rate has continued a recent streak of volatility but has shed 6 bps in the same period to reach 7.36%.
First American senior economist Sam Williamson is among the market observers who say that the Federal Reserve will leave benchmark rates unchanged following its meeting on Wednesday. This would end a run of three straight cuts, totaling 100 bps, going back to December, leaving the policy rate at a range of 4.25% to 4.5%.
The CME Group’s FedWatch tool on Tuesday showed that 99.5% of interest rate traders are expecting rates to remain unchanged this week. There is debate, however, on the direction of policy for the next two Fed meetings. About 30% of traders believe a 25-bps cut will occur in March, while 42% are predicting one in May.
“With the economy on a steady course and inflation still elevated but gradually cooling, the Fed has increasingly adopted a more cautious path back toward the neutral rate,” Williamson said in written commentary. “Policymakers are also likely awaiting greater clarity around the potential inflation risks regarding proposed federal policies before announcing additional cuts.”
The federal policy proposals being referred to are President Donald Trump’s expected tariffs on imported goods. The Trump administration is reportedly set to enact 25% tariffs on Canada and Mexico as early as Saturday. These could result in higher levels of inflation and are likely to stymie efforts by homebuilders to ramp up the pace of construction.
Although mortgage rates have leveled off in the immediate aftermath of Trump’s return to the White House, it could be deep into 2025 before borrowing costs drop below 7% or move closer to 6%, as many housing prognosticators have called for.
“Expectations for stronger growth going forward, concerns around inflation reigniting, and policy uncertainty will likely keep borrowing costs elevated across the economy to begin the year,” Williamson said. “Mortgage rates could drift modestly lower in the second half of the year as the market gains more clarity about the outlook for monetary policy. Despite this, 2025 may still see modest recovery as more buyers adapt to the ‘higher-for-longer’ rate environment.”
Other affordability metrics aren’t providing much relief to prospective homebuyers. Prices continued to rise across the country in November, according to the latest S&P CoreLogic Case-Shiller index released Tuesday. The index reached an all-time high for the 18th straight month, and annualized growth accelerated to 3.8% in November, up from 3.6% in October. Price gains in the largest U.S. cities remain well above 4%.
Altos Research data, however, points to a potential price decline for the upcoming spring purchase season. The current median U.S. home price of $421,000 is down 0.7% year over year, while the median price for new pending sales has grown by roughly 2% of late. Additionally, Altos founder Mike Simonsen notes that the share of listings with a price cut has grown from 31% to 33% in the past year.
“By the end of February, we’ll have the most price reductions of any February in many years,” Simonsen wrote Monday. “These are homes that are on the market now, with no offers. They’ll take a price cut and hopefully get an offer in February. That deal closes in March, and by April, you should be hearing the headlines that reflect the weakness we can see in the active market data.”
