Mortgage forecasts for the week of January 5-11, 2025

New year, new housing market? Not exactly.

in Early 2025Affordability continues to be a major challenge for potential homebuyers, he said, as prices and listing prices have proven to be flat Joel Bernerchief economist at Realtor.com.

Average rate for 30-year fixed mortgage It started 2025 near 7%, slightly higher than it was last January.

“There are several key factors that can cause mortgage rates to rise or fall,” he said. Valerie Saunderschief executive strategist at the National Association of Mortgage Brokers. The mortgage market is strongly affected by inflation, Federal Reserve policiesBond prices, GDP growth and employment figures, to name a few.

Based on the current economic conditions, A Significant decline in mortgage rates Before the spring home-buying season, it is unlikely, according to Saunders.

Moreover, given the recent strong economic data and speculation that President-elect Donald Trump Tax, immigration and tariff proposals With inflation reignited, the Fed expects a much slower pace of interest rate cuts by the agency in 2025.

With so much uncertainty, the only thing that is certain is this Mortgage rate forecasts Always changing. “Buyers shouldn’t worry about timing the mortgage interest rate market, and instead should focus on finding a home that meets their budget and making as much of a down payment as possible,” Berner said.

Read more: Mortgage rate forecasts for 2025

Where will mortgage rates go in 2025?

Aside from the usual daily fluctuations, Mortgage rates It is expected to remain above 6.5% over the next few months. If inflation continues to slow and the Fed is able to implement its expected 0.25% cuts, mortgage interest rates could fall to closer to 6.25% later in the year.

Today’s rates seem high compared to last rates 2% From the era of the epidemic. But experts say getting less than 3% on a 30-year fixed mortgage is unlikely without a severe economic downturn. Since the 1970s, the average price of a 30-year fixed mortgage It was about 7%.

Only a sudden economic shock, such as the onset of a recession or a rise in oil prices, can cause mortgage rates to decline, he said. Keith GambingerVice President of Mortgage Website HSH.com. “Radical changes in trend are usually the result of some significant event emerging somewhere that upsets the financial markets.”

What will affect mortgage rates in the near term?

The biggest factors affecting mortgage rates are the economic policies pursued by the new administration. Trump Proposals for tax cuts and tariffs It could stimulate demand, increase the deficit and cause inflation to rise again. Mortgage rates are very sensitive to inflation.

“Tax cuts, tariffs and mass deportations are all inflationary measures that will indirectly raise mortgage rates while directly increasing the cost of building and buying homes,” Berner said. If these policies are implemented faster than markets expect, it could lead to an equally rapid rise in mortgage rates, Berner said.

Higher inflation would also prompt the Fed to delay future interest rate cuts. Although the Fed influences the direction of overall borrowing rates, it… It does not directly control the mortgage market.

However, investors are interested in the Fed’s future expectations on interest rate adjustments because it determines the trading strategy and risk assessment. That’s why market forces often move in anticipation of Fed policy moves.

middle 30-year fixed mortgage rates It tracks bond yields closely, specifically 10-year Treasury yields. If unemployment rates are forecast to rise, bond yields and mortgage rates will fall. But if the result does not match market expectations, returns may fluctuate more or less quickly.

Mortgage rates are also affected by geopolitical events, including military conflicts and elections. Political instability can lead to economic uncertainty, which can lead to greater volatility with bond yields and mortgage rates.

Bond market investors must be convinced that the economy is slowing in order for mortgage rates to reverse course. For this reason, in the absence of a new downward shift in the inflation trend or… Sudden weakening of working conditionsMortgage rates will remain close to 7% for a while, Gumbinger said.

What will affect the housing market in 2025?

today Unsustainable housing market Consequences of higher mortgage rates, a Long-standing housing shortagesRising house prices and loss of purchasing power due to inflation.

🏠 Low housing stock: A balanced housing market typically has five to six months of supply. Most markets today average about half that amount. according to Freddie MacWe still have a shortage of about 3.7 million homes.

🏠 High mortgage Rates: In early 2022, mortgage rates reached historic lows of around 3%. As inflation rose and the Fed raised interest rates to tame it, mortgage rates more than doubled. In 2025, mortgage rates will remain high, taking millions of potential buyers out of the housing market.

🏠 Rate lock effect: Since the majority of homeowners are Locked in mortgage rates Below 5%, they are reluctant to give up low mortgage rates and have little incentive to list their homes for sale, leaving a scarcity of resale inventory.

🏠 House prices rise: Although demand for home purchases has been limited in recent years, home prices remain high due to a lack of inventory. The average price of homes in the United States was $429,963 in November, up 5.4% year over year, according to Redfin.

🏠 Severe inflation: Inflation means an increase in the cost of basic goods and services, which leads to a decrease in purchasing power. It also affects mortgage rates: when inflation is high, lenders usually raise interest rates on consumer loans to ensure a profit.

Is it better to wait or buy?

It’s never a good idea to rush into this Buying a house Without knowing what you can afford, so set a clear budget for purchasing a home. Here’s what experts recommend before buying a home:

💰 Build your credit score. Your credit score will help determine whether you qualify for a mortgage and at what interest rate. A Credit score A score of 740 or higher will help you qualify for a lower rate.

💰 Save for a larger down payment. greater Initial payment It allows you to get a smaller mortgage and get a lower interest rate from your lender. If you can afford it, a down payment of at least 20% will also void your private mortgage insurance.

💰 Shop for mortgage lenders. Comparing loan offers from multiple mortgage lenders can help you Negotiate a better price. Experts recommend getting at least two or three loan estimates from different lenders.

💰 Consider renting. choose for Rent or buy a house It’s not just comparing your monthly rent to your mortgage payment. Renting offers flexibility and lower upfront costs, but buying allows you to build wealth and have more control over your housing costs.

💰 Consider mortgage points. You can get a lower interest rate on your mortgage by purchasing Mortgage pointsThe cost of each point is 1% of the total loan amount. One mortgage point equals a 0.25% decrease in your mortgage rate.

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