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Mortgage rates inched up again from 6.85% last week to 6.91% for the average 30-year fixed home loan for the week ending Jan. 2, according to Freddie Mac.
“Inching up to just shy of seven percent, mortgage rates reached their highest point in nearly six months,” said Sam Khater, Freddie Mac’s Chief Economist. “Compared to this time last year, rates are elevated and the market’s affordability headwinds persist. However, buyers appear to be more inclined to get off the sidelines as pending home sales rise.”
The Federal Reserve slashed a key interest rate by a quarter-point in late December in its third cut of the year.
Because investors had anticipated the central bank’s latest rate cut, it has already been factored into the long-term bond markets, which are the primary drivers of mortgage interest rates.
December saw the strongest seasonal slowdown of the residential real estate market in nearly two years, with homes standing unsold for an average of 70 days, up from 62 days in November.
Home inventory also dropped 8.6% from November, marking the largest slump since January 2023, says Realtor.com® senior economist Ralph McLaughlin in his December monthly housing report.
An uptick in mortgage rates, combined with a dearth of home stock and high listing prices, had all conspired to keep would-be buyers on the sidelines over the holiday season, even as the “lock-in” effect remained firmly in place for homeowners.
In other words, potential buyers were reluctant to buy and potential sellers were reluctant to sell, making December 2024 the slowest December since 2019.
The housing market outlook for 2025
The Realtor.com® economic research team projects that mortgage rates will average 6.3% through 2025 and end the year at around 6.2%, setting the stage for a more buyer-friendly market.
Economists also expect that the lowering of rates will give the sluggish market the shot in the arm it needs by spurring on cagey homeowners to list more properties in the coming months, which, in turn, would boost inventory levels and attract hesitant buyers who have been biding their time.