Mortgage Interest Rates to be 5.75% to 6.25% in 2025 (Housing Market Update)

Summary

In this video, the housing market update for November highlights a 5.4% increase in home prices and a 4.4% rise in home sales compared to last year. The forecast for mortgage interest rates in 2025 suggests a range of 5.75% to 6.25%, with predictions of modest home price growth of 1% to 3%. The video discusses the impact of mortgage rates on home prices and clarifies that lower rates will stimulate demand but not necessarily lead to significant price drops. Overall, 2025 is expected to be a year of slow, steady growth without dramatic changes.

Takeaways

• 😀 Housing market is heating up: In November, home prices and home sales increased due to falling mortgage interest rates.
• 😀 Home prices are up 5.4% year-over-year: Median home prices have seen a significant increase compared to last year.
• 😀 Home prices have increased by 45% since the start of the pandemic: This chart shows significant price growth over the past few years.
• 😀 Number of homes sold has increased by 4.4% year-over-year: However, it's still 20% lower than pre-pandemic levels.
• 😀 Housing inventory is at 1.7 million: This is a 10% increase compared to last year but still lower than pre-pandemic numbers.
• 😀 26.5% of homes are selling above list price: This suggests that home buyers may need to offer more than the asking price in current market conditions.
• 😀 Federal Reserve influences mortgage rates: While it doesn't directly control them, its actions impact the bond market, which affects rates.
• 😀 Mortgage rates are expected to remain high in 2025: The 30-year fixed mortgage rate is predicted to be between 5.75% and 6.25% in Q1 of 2025.
• 😀 Mortgage rates and government debt interest rates are correlated: Typically, the 30-year mortgage rate is 1% to 2.5% higher than the interest rates on the 10-year treasury note.
• 😀 Falling mortgage interest rates could still prop up home prices: Although lower rates can reduce financing costs, they can also contribute to higher home prices if demand increases.
• 😀 Modest home price appreciation is expected in 2025: Most projections suggest home prices will grow by 1% to 3%, with the first half of the year seeing slower growth.

Q & A

What caused the recent increase in home prices and home sales in November?

The increase in home prices and home sales in November was driven by falling mortgage interest rates, which helped stimulate the real estate market.

What is the current year-over-year change in median home prices?

Median home prices are up by 5.4% compared to 12 months ago, according to recent data from MLS and public records.

How much have home prices increased since the start of the pandemic?

Home prices have increased by 45% since the start of the pandemic, according to data from the National Association of Realtors.

How does the number of homes sold in November compare to pre-pandemic levels?

The number of homes sold in November is up by 4.4% compared to 12 months ago but still down by about 20% compared to pre-pandemic levels.

What is the current inventory of homes for sale, and how does it compare to the pre-pandemic market?

The current inventory of homes for sale is about 1.7 million, which is a 10% increase compared to 12 months ago. However, it is still below the pre-pandemic level of over 2 million.

What percentage of homes are currently selling above the list price?

About 26.5% of homes are selling above the list price, which is considered within the normal range based on historical data.

How do mortgage interest rates influence the housing market?

While the Federal Reserve does not directly control mortgage rates, their monetary policy influences bond markets, which in turn affects mortgage interest rates. Lower interest rates typically increase demand for homes, but can also push home prices higher.

What are the mortgage interest rate predictions for the first quarter of 2025?

The forecast for the first quarter of 2025 is that the 30-year fixed mortgage rates will be between 5.75% and 6.25%, based on current economic conditions.

What is the relationship between mortgage rates and home prices?

When mortgage rates fall, they generally boost demand for homes, which can prop up or even increase home prices. However, falling rates don’t necessarily lead to rising prices, as home prices can also be affected by other factors.

What is the predicted growth in home prices for 2025?

The majority of institutions predict that home prices will grow by 1% to 3% in 2025. The first half of the year is expected to see modest price appreciation, but further predictions beyond mid-2025 are uncertain due to factors like inflation and government policies.