Mortgage rates are once again on the rise, creating a mixed bag for potential homebuyers. Recent reports show the 30-year fixed-rate mortgage (FRM) averaged 6.54% as of October 24—up from 6.44% the previous week and down significantly from last year’s 7.79%. Meanwhile, the 15-year FRM also saw its own minor increase, settling at 5.71% compared to 5.63% the week before. According to Freddie Mac's chief economist Sam Khater, the continued strength of the economy is the driving force behind the unusual rate swings.
Khater elaborates on this phenomenon, stating, "The continued strength of the economy drove mortgage rates higher once again this week. Over the last few years, there has been a tension between downbeat economic narrative and incoming economic data stronger than this narrative." This unsettling unpredictability has led to heightened volatility, showing how sensitive the housing market remains under economic pressures.
Holden Lewis, mortgage expert at NerdWallet, points out the troubles creating friction for prospective buyers. The tandem of rising mortgage rates and high home prices has exacerbated the situation, compelling many potential buyers to sit on the sidelines. Specifically, he mentions, "Mortgage rates have been rising steadily for a month as the job market remains resilient. Meanwhile, the median home price has exceeded $400,000 for six straight months." This unfortunate combination has contributed to the slowest pace of home sales seen in almost 14 years, evidenced by existing-home sales slipping 1% to rates projected at 3.84 million annually.
Despite the difficult circumstances, data from the Census Bureau indicates some positive signs. New single-family home sales rose by 4.1% month-over-month and are up 6.3% compared to last year. NAR chief economist Lawrence Yun observes, "Home sales have been stuck around the four million-unit pace for the past 12 months, but factors usually associated with higher sales are developing." Factors like more inventory choices for consumers, lower mortgage rates than last year, and job growth all hint at possible market improvement.
Even as inventory has climbed to 1.39 million units at September’s end—reflecting a 1.5% rise from August and 23% year-over-year—there remains disbelief over its sufficiency to impair the current market. Eugene Lee, also from the National Association of Realtors (NAR), insists, "More inventory is certainly good news for home buyers as it gives consumers more properties to view before making decisions." The general consensus continues to hold true: struggle remains for buyers to find affordable homes, especially with minimal inventory of distressed properties contributing to low rates of mortgage delinquency.
Moving forward, experts suggest we may see shifts toward greater affordability as wage growth is now beginning to eclipse home price increases. This could provide some relief to buyers faced with the brunt of rising mortgage rates, which many believe must drop below significantly to spark real purchasing activity.
These trends leave many wondering what the housing market will look like as we venture toward 2025. Anticipated reductions in mortgage rates could inspire confidence and return potential homebuyers to the market—provided there’s enough inventory to meet renewed demand. With indicators hinting at improvement, those who have been patiently waiting may soon find the time right to buy.
Homebuyers gearing up for 2025 might not find themselves as pressured as they have been over the past few years. Assistance is on hand, and experts advise potential buyers to take steps now to prepare. Reviewing financial situations, increasing credit scores, and getting pre-approved for mortgages are all ways to make informed buying decisions when the market starts to favor consumers again.
2025 may not only be pivotal because it marks changes to mortgage rates but also due to the greater availability of homes for sale. While the housing market previously faced challenges with inventory shortages, experts believe the increase will alleviate some pressure, providing buyers choices as we head toward the new year.
Yet, as promising as these forecasts sound, there’s also the reality of increased competition. Those improvements typically draw more buyers out, which could potentially lead to another competitive seller's market echoing conditions from 2021 and 2022 if demand outstrips supply. The underpinning need for careful financial planning becomes clear as buyers are encouraged to prioritize their fiscal readiness before making any significant purchases.
Preparation and awareness will play key roles for buyers as they navigate this complex and ever-changing housing scene over the next several years. With the right steps outlined, aspiring homeowners can position themselves for success, ready to seize the opportunities presented by new market conditions.
