Mortgage rates will likely remain higher this year than previously expected, due to persistent inflation and lingering uncertainty about President Donald Trump‘s trade policy, according to Fannie Mae.

In a revised projection last week, Fannie Mae says it expects the 30-year fixed-rate mortgage to average 6.8% across 2025, and end the year at 6.6%.

That’s the second upward revision in a row for Fannie Mae, which in December projected rates to average 6.2% by the end of 2025, and bumped that up to 6.5% in January.

So far this year, rates have remained stubbornly close to 7%. Mortgage rates averaged 6.85% last week, according to Freddie Mac, and have remained above 6.8% since mid-December.

A number of factors are to blame, including hotter inflation data and stronger economic growth so far this year than most economists had expected.

Uncertainty also surrounds the implementation of Trump’s agenda on tariffs, which could influence homebuilding costs and long-term borrowing rates.

Higher tariffs could spur goods inflation and drive interest rates higher, and Trump has sown uncertainty by threatening, then suspending, massive tariffs on Canada and Mexico.

“Economic growth was strong to start the year as fourth-quarter personal consumption data came in above our expectations,” says Kim Betancourt, Fannie Mae’s vice president of multifamily economic and strategic research.

“However, ongoing uncertainty around trade policy adds risk to our GDP and inflation outlooks, which may have implications for mortgage rates, although the direction—up or down—would depend on a number of factors,” she adds.

Fannie Mae’s Economic and Strategic Research Group also revised its projection for existing-home sales slightly upward for 2025, due to a stronger-than-expected December sales pace and resilient purchase applications data.

However, the level of existing sales is still expected to be 22% below the pace seen in 2019, following two consecutive years of nearly 30-year lows for home sales in 2023 and 2024.

The path of mortgage rates will also have a significant effect on the pace of home sales for the year.

“Higher mortgage rates would exacerbate the existing ‘lock-in effect’ and worsen affordability, which may then weigh on home sales and mortgage originations activity,” says Betancourt. “Of course, if mortgage rates move lower, we’d likely see an improvement in affordability and a corresponding pickup in housing activity.”

In December, the Realtor.com® economic research team initially forecasted mortgage rates would gradually ease through 2025, and average around 6.2% by the end of the year.

Since then, the Federal Reserve has paused its cuts to the short-term policy rate, and the outlook for any further cuts this year has dimmed significantly, putting upward pressure on long-term mortgage rates.

“Since we issued our mortgage rate forecast as part of the housing and economic forecast, mortgage rates have trended higher than we expected,” says Realtor.com Chief Economist Danielle Hale.

“If we were issuing an updated forecast today, the mortgage rate projection would likely be revised higher,” she adds. “An above-average amount of policy uncertainty makes it hard to put a fine point on any forecasts, but I think a year-end rate closer to 6.5% is now more likely.”

Annual inflation slowed last month, in a welcome development for homebuyers that could bring some relief to mortgage rates.

Overall prices rose 2.8% in February from a year earlier, a slowdown from the 3% increase recorded in January, according to the Labor Department’s consumer price index data released on Wednesday.

On a monthly basis, prices rose 0.2%, which was slower than the 0.3% consensus expectation from economists.

Stocks reacted positively to the news, with futures for all three major indexes rising in the pre-market after several days of heavy selling driven by concerns over the Trump administration’s trade policies.

Rising housing costs accounted for nearly half of the overall monthly inflation figure, but falling gasoline and airfare prices partly offset this.

On an annual basis, shelter costs were up 4.2% and remained a major driver of overall inflation. A recent report from Realtor.com® showed that the housing supply gap of 3.8 million homes is an important contributor to higher housing costs.

“With recession worries rising, attention will be focused on this inflation reading, and today’s data offer a nice counterpoint to last month’s higher-than expected figures,” says Realtor.com Chief Economist Danielle Hale.

The Federal Reserve will meet next week to issue its next rate policy decision, after pausing rate cuts at its last meeting in January over concerns that inflation is not cooling as quickly as expected.

Financial markets are predicting that the Fed will again leave rates unchanged at their current range of 4.25% to 4.5%, despite the latest inflation reading coming in cooler than expected.

At a forum last Friday, Fed Chair Jerome Powell underscored that it takes several consistent inflation readings to signal a shift.

Policymakers “do not overreact to one or two readings that are higher or lower than anticipated,” he said.

Fed pause leaves housing market in limbo as spring arrives

Although the latest inflation data should benefit mortgage rates to some degree, rates remain unlikely to fall significantly anytime soon.

Mortgage rates have remained uncomfortably high since last fall, with 30-year fixed rates averaging 6.63% last week, according to Freddie Mac. Most economists expect rates to remain well above 6% through 2025, though the onset of a recession could drive them down quickly.

“With no Fed rate cut until at least the summer, the mortgage market has been reacting to economic data on the broader economy,” says Bright MLS Chief Economist Lisa Sturtevant.

President Donald Trump‘s trade policy, including his constantly shifting proclamations on tariffs, has introduced a wild card of uncertainty to the economy that sent the Nasdaq composite into correction territory this week.

“It is widely believed that the Trump administration’s tariffs will raise prices, putting upward pressure on inflation and keeping rates elevated,” says Sturtevant. “However, at the same time, there are growing concerns that the economy is slowing. If the economy does cool, mortgage rates could fall.”

Growing fears of a recession have also damaged consumer confidence, which in February experienced its biggest monthly decline in nearly four years, according to the Conference Board.

Altogether, it makes predictions difficult for the spring season, which is the most popular time of year to buy and sell homes.

“Although mortgage rates are a critical piece of the housing market puzzle, consumer confidence might be an even more important metric to watch,” says Sturtevant. “People are less likely to make big decisions, like buying or selling a home, when they feel uncertain about their financial situations.”

Spring is off to a roaring start, and along with it are changes to the market, including the latest mortgage rates, housing inventory, and the hottest housing markets.

This week, unemployment edged higher, even as companies still added workers to payrolls. Importantly, wages rose by 4%—high enough to propel real wage growth but not so high as to raise inflation concerns. 

It’s worth noting that data for the jobs report was collected in mid-February, when stocks were near all-time highs. The drop in financial markets since then signals investor concerns over future growth, some of which may be driven by an uptick in policy uncertainty. 

One upside of the uncertainty is that it has increased interest in safe haven investments. Earlier this week, the 10-year yield was down more than 60 basis points from its January peak. 

Mirroring this move, mortgage rates dropped for a seventh straight week, to 6.63%, a welcome move as homebuying season approaches.  

In the housing market, Realtor.com® weekly housing inventory showed that new-listings growth was too modest to power acceleration in inventory growth, which registered just below last week’s pace.

On the plus side, buyers still have substantially more homes to choose from compared with last year. Prices have trended relatively flat as homes are taking longer to sell. 

As a follow-up to the Realtor.com February Housing Trends report that looked at government layoffs and housing, we’ve added weekly housing metrics tracking for the five major metros where federal government employees are a large share of the workforce. 

As of this week, there is still no evidence of a slowdown in these markets. It’s also worth noting that in late 2024, these areas had lower unemployment rates than most other markets. 

In the February Hottest Housing Markets report, Hartford, CT, edged Manchester, NH, out of the No. 1 spot. Despite the drama at the top, there’s a lot of stability on the list, which continues to be dominated by Northeast and Midwest markets. 

As senior economic research analyst Hannah Jones noted in the report, one of the hallmarks of these in-demand markets is that sellers are in a good position, and we see fewer price cuts in several of them.

Mortgage rates have dipped slightly again for the fifth straight week, bringing some modest relief to prospective homebuyers as spring approaches.

The average rate on 30-year fixed home loans dipped to 6.85% for the week ending Feb. 20, down only marginally from 6.87% the prior week, according to Freddie Mac. Rates averaged 6.9% a year ago.

“The 30-year fixed-rate mortgage has stayed just under 7% for five consecutive weeks, and in that time has fluctuated less than 20 basis points,” says Freddie Mac Chief Economist Sam Khater. “This stability continues to bode well for potential buyers and sellers as we approach the spring homebuying season.”

The spring selling season, when the housing market generally sees the greatest activity of the year, unofficially kicked off after Super Bowl weekend, when buyers and sellers start lining up agents.

Activity generally picks up in earnest in March, with many buyers and sellers aiming for a closing date around the end of the school year, to avoid disruptions for families with younger children.

Although affordability and elevated mortgage rates remain serious challenges for many buyers, relative stability for mortgage rates should allow for better planning and budgeting in the coming months.

Mortgage rates have remained little changed since the Federal Reserve paused its rate cuts last month, and barring unforeseen economic calamity, home loan rates are unlikely to move significantly in the near future.

“Stubborn inflation will likely continue to hinder mortgage rate progress,” says Realtor.com® senior economic research analyst Hannah Jones. “As a result, hopeful homeowners are at an all-too-familiar crossroads and must decide whether to continue renting or to take the plunge into the housing market.”

Prices remain cool as spring approaches

The Realtor.com economic research team’s weekly housing market update shows that for the week ending Feb. 15, the median list price of homes on the market was down 0.5% from the same week last year.

It marked the 38th week in a row in which the national median home list price was either flat or declining on an annual basis, a stretch dating to June 2024.

For buyers eyeing a purchase in the spring selling season, the slowdown in price growth will come as welcome relief, helping to offset higher mortgage rates.

“Though prices and mortgage rates are still significantly higher than they were five years ago, the cooling of the market means that buyers can take their time to find the right home for their needs, possibly even one with a reduced price,” says Realtor.com senior economist Joel Berner.

New listings and active inventory continue to rise

The number of new homes hitting the market last week jumped 5% from the same week a year ago, in another buyer-friendly trend.

Active inventory also continued to rise, and the total number of homes on the market was up 27.6% from year-ago levels.

It marked the 67th consecutive week of rising inventory and the sixth straight week of a rising number of new listings.

The trend should help alleviate the supply shortage that has been a longstanding pain point for buyers, who have faced a market plagued by a scarcity of options for the past several years.

“Buyers can expect more options to choose from in 2025 as we enter the start of the homebuying season,” says Berner.

Time on the market still growing

Homes are staying longer on the market than they did a year ago, with the typical home remaining on the market six days longer for the week ending Feb. 15.

Rising time on the market is another buyer-friendly signal, giving home shoppers a better chance to weigh their options and craft a strong offer, with less chance of being pressured to compete with other bids.

“This is all good news for buyers, who had been feeling the effects of the post-pandemic pinch in for-sale listings for several years until the market entered its current rebalancing phase,” says Berner.

A neighborhood near the waterfront of West Palm Beach, FL, is slated to get a makeover as a local builder moves forward with plans to build 100 homes on land bought up by a local powerhouse family.

GL Homes wants to rebuild a 10-block area of West Palm Beach, adjacent to its waterfront. The prime real estate in the Northwood Gardens neighborhood has remained quiet in recent years, but the attraction to the area is heightened due to more luxury condo buildings popping up along the waterfront.

The homebuilder is collaborating with Huizenga Holdings, Inc., also of West Palm Beach. Huizenga Holdings has been quietly buying homes in the area for years.

Huizenga Holdings is a family investment company founded by the late entrepreneur H. Wayne Huizenga, the late billionaire behind Blockbuster video, Waste Management, and AutoNation. He also once co-owned the Miami Dolphins, Florida Panthers, and Miami Marlins. The family’s business and real estate is now run by his eldest son, also H. Wayne Huizenga, who took over after his father’s death in 2018.

The homes would be built in the 10-block neighborhood, between 40th Street and 45th Street, bordered by Broadway and North Flagler Drive—on lots owned by Huizenga Holdings. There are already existing homes within that area, not owned by Huizenga.

The concept is still years away. GL Homes, one of Florida’s largest builders, says it doesn’t expect to begin construction until 2026.

A new look

The proposed project would build single-family homes in the 10-block radius.

“The homes will be developed individually upon sale to respective buyers,” a company spokesperson said in a statement to The Palm Beach Post. “This is GL Homes’ first foray into redevelopment within an urban city core. We look forward to working closely with the City of West Palm Beach.”

The Palm Beach Post reports that, according to city officials, this project appears to be the “largest attempted redevelopment of a single-family neighborhood in the city’s modern history.”

“To take an area like this and retrofit it like they’re proposing is a little bit unique,” Rick Greene, the city’s development services director, told the publication. “I don’t think we’ve seen it to the scale that Huizenga and GL Homes are proposing.”

Not everyone is pleased with the proposal. At a Feb. 18 planning commission meeting, Commissioner Shalonda Warren expressed concern that some residents would be forced out of their homes.

Greene explained that GL Homes has not yet turned in formal plans, but the company has had “extensive talks with city planners.” The Palm Beach Post reports city planners have been working on a plan to rezone the area to encourage more development along the thoroughfare.

GL Homes has agreed to build outward-facing townhomes along Broadway, instead of single-family homes that open onto side roads, according to Greene.

Cathleen Ward, city commissioner, told The Palm Beach Post that the project would “provide needed modern housing options in an area where most existing homes were built in the 1930s and 1950s.”

Ward, who also lives in the area, said, “I think it’s refreshing that they want to build nice new homes and want to attract buyer in here.”

Family company with Florida roots

Aside from this project, Huizenga Holdings recently announced a different waterfront project in collaboration with Integra Investments of Miami. The Rybovich Marina Project will consist of four residential towers joined by a waterfront promenade lined with shops and restaurants along the Intercoastal Waterway. It’ll add 660 new homes to West Palm Beach.

GL Homes started in Davie, FL, in 1976. The family-owned business has communities throughout the Sunshine State, from Naples to Boca Raton. The company says it understands construction “designed for Florida’s unique climate.”

Many of their communities include amenities such as community pools, recreation centers, and walking trails. The homebuilder also specializes in communities for ages 55+.

Homes start in the $300,000s, all the way up to luxury residences worth $2.5 million. The new-home builder allows its clients to create the perfect paradise.

Realtor.com® has reached out to Huizenga Holdings, Inc. and GL Homes for comment.

Mortgage rates continued to drop this week, as economic uncertainty raised the prospects for further rate cuts from the Federal Reserve this year.

The average rate on 30-year fixed home loans dropped to 6.63% for the week ending March 6, down substantially from 6.76% the prior week, according to Freddie Mac. Rates averaged 6.88% a year ago.

Mortgage rates have now declined for seven consecutive weeks, returning to levels last seen in December after peaking at just above 7% in the middle of last month.

“As the spring homebuying season gets underway, the 30-year fixed-rate mortgage saw the largest weekly decline since mid-September,” says Freddie Mac Chief Economist Sam Khater. “The decline in rates increases prospective homebuyers’ purchasing power and should provide a strong incentive to make a move.”

Mortgage rates have benefited from a combination of factors, including economic uncertainty and growing fears of a potential recession, which have reduced long-term borrowing costs.

Falling global oil prices have also been beneficial, reducing the prospects of continued high inflation. And stock market jitters, fueled by President Donald Trump‘s tariffs on Canada and Mexico, have driven investor cash into bonds, driving down long-term rates.

The rate relief is welcome for homebuyers as the spring buying and selling season kicks off. Still, most experts project that mortgage rates will remain above 6% through the end of the year and beyond.

“Though we expected a bit of good news on rates this week, we do not anticipate significant relief from high mortgage rates in the near future because of inflation remaining stubbornly high, which will not be helped by the tariffs that the Trump administration appears committed to rolling out,” says Realtor.com® Senior Economist Joel Berner.

“Expectations of higher consumer prices in the future leads debt market investors to demand higher returns on their investments, indirectly pulling interest rates up at the same time that they deter the Federal Reserve from making direct cuts to interest rates,” he adds.

Still, rates have already fallen enough to rekindle some homeowner interest in refinancing mortgages, says Khater.

“In fact, the refinance share of market mortgage applications released this week reached nearly 44%, the highest since mid-December,” he notes.

Prices down as new listings rise

The Realtor.com economic research team’s weekly housing market update shows that for the week ending March 1, the median list price of homes on the market was down 0.3% from the same week last year.

It marked the 40th week in a row in which the national median home list price was either flat or declining on an annual basis, a stretch dating to June 2024.

Although median listing prices are modestly down, sales prices are up, due mainly to a faster sales pace at the higher end of the market. In other words, more expensive homes seem to be finding more buyers than modestly priced one.

Meanwhile, the number of new listings hitting the market last week was up 0.1% from last year, the eighth consecutive week of new listing growth.

Active inventory and time-on-market are up

The total number of homes for sale last week was up 27.6% from a year ago, due in part to a decrease in active buyers.

Homes are taking longer to sell than they did last year, with the typical home sitting on the market four days longer before going under contract.

“The housing market has not offered many exciting developments over the last year as home prices and mortgage rates remain stubbornly high,” says Realtor.com Senior Economic Data Analyst Hannah Jones.

“However, ample for-sale inventory and climbing price reductions suggest that while buyers may see unaffordable housing costs at first glance, sellers are likely more flexible than in years past,” she adds.

Single-family housing starts slowed dramatically in January, as builders kicked off the new year under the cloud of higher mortgage rates and potential new tariffs that could raise construction costs.

Starts on single-family units, which account for the vast majority of all homebuilding, dropped 8.4% from December to a seasonally adjusted annual rate of 993,000, the U.S. Census Bureau reported Wednesday. The January figure was down 1.8% from a year earlier.

Total housing starts, including more volatile multifamily construction, were at 1,366,000 annualized last month—down 9.8% from December and 0.7% less than a year earlier.

“Builders are exercising caution in January 2025, responding to the overall slow home sales market of 2024, in which fewer existing homes were sold than in any year since 1996,” says Realtor.com® Senior Economist Joel Berner.

A string of historic winter storms in January likely contributed to the sharp slowdown in home construction last month, although the figures are seasonally adjusted and also down from their level a year earlier.

Homebuilder sentiment dropped to a five-month low in February despite a national housing shortage, as mortgage rates hovered near 7% and builders voiced fears that the Trump administration’s tariff policies could raise the cost of key materials.

The National Association of Home Builders/Wells Fargo Housing Market Index plunged to its lowest level since September in the latest reading on Tuesday, erasing the gains it made after President Donald Trump‘s election win in November.

Trump slapped a 10% additional tariff on Chinese goods and threatened 25% levies on goods from Canada and Mexico, the respective sources of most of the lumber and drywall gypsum used in U.S. home construction.

“As mirrored in our latest builder survey, high construction costs, elevated mortgage rates and challenging housing affordability conditions are causing builders to approach the market with caution,” says NAHB Chairman Carl Harris. “The uncertain policy environment in terms of a better regulatory climate and impending tariffs offers both upside and downside risks in the near-term.”

Permits remain flat while completions rise

Permits for new single-family homes—a leading indicator of future construction—were virtually unchanged in January from the prior month, at an annualized rate of 996,000.

However, completions rose as homes that were in the construction pipeline were wrapped up. Single-family completions jumped 7.1% from December to 982,000 annualized.

“Builders are hustling to wrap up their projects and get new homes onto the market in advance of the start of the spring buying season,” says Berner.

“The growing gap between completions and starts suggests some pessimism about building and selling new homes in the near future, but also some optimism about the current state of the market despite high mortgage rates,” he adds.

Mortgage rates have remained close to 7% since the start of the year and are expected to remain elevated for the foreseeable future, after the Federal Reserve paused cuts to its short-term policy rate.

For homebuilders, higher interest rates deliver a double whammy, raising borrowing costs to finance construction as well as making homes relatively more expensive for homebuyers.

The full impact of higher rates will become clearer in a few weeks, as the spring homebuying season begins in earnest.

“The uptick in completions is good news for buyers, who continue to see more options available to them both overall and among newly built homes,” says Berner. “If builders continue to prioritize smaller, less expensive projects, we will see affordability in the housing market improve.”

President Donald Trump has imposed sweeping 25% tariffs on Canada and Mexico to pressure the U.S. neighbors to step up border enforcement—but homebuilders say they could boost new home prices.

The tariffs on America’s two largest trading partners took effect early on Tuesday, along with an additional 10% tariff on China, after Trump said the countries had failed to show enough progress in limiting the flow of illegal drugs and unauthorized immigrants into the U.S.

“Any tariffs that raise the cost of building products are going to flow directly to the consumer, and this will have a detrimental effect on housing affordability,” National Association of Homebuilders CEO Jim Tobin told Realtor.com® last fall.

About 70% of the dimensional lumber and drywall gypsum used in residential construction is imported from Canada and Mexico respectively, according to industry data. China is a source of some fixtures and finishes used in homes, though it is a less significant player in the homebuilding supply chain.

“Rising costs due to tariffs on imports will leave builders with few options,” says Realtor.com Chief Economist Danielle Hale. “They can choose to pass higher costs along to consumers, which will mean higher home prices, or try to use less of these materials, which will mean smaller homes.”

Hale notes that while homebuilders and newly built homes will bear the initial brunt of the tariffs, the impacts could ripple out to the overall housing market in time.

“The premium on new construction homes that had been shrinking in many markets according to Realtor.com data could begin to rise again, or we may see buyer’s willingness to pay rise for existing homes as newly built homes get pricier—which would mean rising prices for existing homes, too,” she says.

“We may also see a lower appetite for major remodeling projects that would rely on these tariff-affected inputs, hamstringing the ability of consumers to remake their homes to fit their current needs,” says Hale.

Trump calls for more logging to replace foreign lumber

Trump has said that the U.S. is too reliant on foreign lumber, and on Saturday he signed executive orders aimed at ramping up domestic timber production and opening up new swathes of national forests for logging.

Environmental groups condemned the move, but the Trump administration says that expanded domestic logging will help bring down building costs and reduce U.S. dependency on Canadian lumber.

As well, a senior White House official tells Realtor.com that the tariffs on Canada, Mexico, and China are a national security measure narrowly targeted at halting the international drug trade and illegal immigration, and are not intended as a long-term economic policy.

The official suggested that the tariffs on Canada and Mexico might not last long enough to significantly impact the supply chain for housing, which has timelines that can stretch over multiple months.

“This is not a trade war, this is a drug war,” Commerce Secretary Howard Lutnick told CNBC on Tuesday morning. Lutnick cited an April 2 deadline for a report Trump has ordered on rebalancing trade deals, saying it would be a time for “lots of discussion on how to reset trade correctly.”

Nevertheless, Canada and Mexico swiftly retaliated by imposing their own tariffs on U.S. goods, raising the specter of a widening trade war.

Canadian Prime Minister Justin Trudeau slammed the new tariffs in a fiery press conference, calling them “a very dumb thing to do” in remarks addressed directly to Trump.

Ontario Premier Doug Ford also vowed to cut off electricity that his province supplies to 1.5 million customers in several U.S. states, including New York, Michigan, and Minnesota.

It’s also unclear exactly what steps Canada, Mexico, and China would have to take on drug and border enforcement to satisfy the White House and end the new tariffs.

The stock market has responded grimly to the trade drama, with the S&P 500 down about 3.7% from a week earlier, as Trump’s intent to impose the tariffs became clear.

“Markets have predictably reacted badly, since this raises the risk that Trump will also follow through on his threats to impose reciprocal country-specific tariffs soon, including a proposed 25% on imports from the EU,” says Paul Ashworth, Chief North America Economist for Capital Economics.

Trump initially announced tariffs against Canada, Mexico, and China in early February but suspended the measures against the U.S. neighbors for 30 days, saying he expected to see them make strides in border enforcement.

He did impose a 10% tariff on China early last month, bringing the total new tariffs on that country to 20% now. Trump has said China needs to crack down on the production of precursor chemicals used to make the deadly drug fentanyl.

Trump is due to address a joint session of Congress on Tuesday night, and he is expected to address the economy and inflation in his remarks.

Annual inflation has risen for the fourth straight month, news that will quickly send mortgage rates higher for prospective homebuyers.

Overall prices were up 3% in January from a year earlier, higher than the 2.9% pace recorded in December, according to the Labor Department’s consumer price index (CPI) data released on Wednesday.

So-called core inflation, excluding volatile food and energy prices, jumped 3.3% on the year, with prices rising in categories including car insurance, used cars and trucks, medical care, and airline fares.

The hotter-than-expected inflation data quickly sent yields on 10-year Treasury notes surging by up to 10 basis points. Mortgage rates tend to follow long-term bond yields.

Rates for 30-year fixed home loans averaged 6.89% last week, according to Freddie Mac, and have hovered near 7% since the beginning of the year.

The Federal Reserve paused cuts to short-term interest rates at its latest meeting last month. The latest inflation data, combined with recent jobs numbers that showed the labor market still humming strongly, will likely discourage the central bank from resuming rate cuts anytime soon.

The Fed aims for a 2% annual inflation rate, and it uses higher interest rates to crack down when inflation runs hotter than its target.

The troubling new inflation report comes after President Donald Trump took office late last month with a vow to lower prices for consumers, and will add pressure on the Republican to deliver on his promise.

Notably, the January uptick in inflation precedes any of the major new tariffs that Trump has promised to impose. Most economists view tariffs—a tax on U.S. companies that import goods from other countries—as inflationary and likely to drive up the cost of certain products.

Housing costs remain a major inflation driver

Rising costs for housing continued to be a major driver of overall inflation last month. The shelter index, which accounts for more than a third of overall CPI, rose 4.4% in January from a year earlier.

Still, it was the lowest annual figure for shelter inflation in three years, following a steady decline in shelter inflation since the figure peaked at more than 8% in early 2023.

“The stickiest part of the inflation measure has been the housing component,” says Bright MLS Chief Economist Lisa Sturtevant. “In January, housing accounted for nearly 30% of the overall monthly rise in prices. However, there are signs that slower home price growth and lower rents are starting to show up in the inflation measures.”

Changes in housing costs can take up to six months or longer to show up in the monthly CPI data, due to how the Labor Department measures rent and estimates costs for homeowners.

“It will be very hard for the headline inflation number to reach the Fed’s 2% goal without a slowdown in housing costs,” says Sturtevant. “More housing supply—both rental and for-sale housing—is the key to easing housing costs and bringing the overall rate of inflation down.” 

Homebuyers ready to make a move this spring might have more incentive to lock in a rate. Mortgage rates eased for a sixth week in a row, to 6.76%. That’s the lowest level of 2025, but it’s still more than half a percentage point above the September low.

It is still very early in 2025, but the housing market is now showing the slowdown we anticipated from the late 2024 spike in mortgage rates. The relief in mortgage rates that we’re seeing now is expected to bring some buyers back to the market, but home sales will likely not register this pickup until the late spring or early summer.

January data on personal income and spending showed upticks in both income and the rate of savings, while the Fed’s preferred inflation gauge steadied. Combined with consumer confidence, which showed a third monthly drop in February, data suggests that consumers are growing more cautious over concerns about the outlook.

In housing news, Case-Shiller showed that sales prices continued to gain between 4% and 5% to end 2024, even though home list prices were flat to lower in this period. Strength was seen in New York City, Chicago, and Boston, while Tampa, FL, saw prices fall.

A similar regional trend continued into February, with asking prices showing the most strength in the Northeast and Midwest. The biggest surprise from the Realtor.com® February Housing Trends report, however, was an uptick in price reductions as a share of active listings. 

We not only saw the highest share of February reductions going back to 2017, we also saw a seasonally unusual increase in price reductions from January. Inventory growth continued, but newly listed homes increased by only half as much as in January, and weekly data showed softening new listings growth as the month progressed. 

Among transaction indicators, new-home sales declined in January and pending home sales also fell. Both new-home sales and pending home sales are counted when contracts are signed and suggest that home sales or closings will slow in the next month or two.

While sales slowed across the board, new-construction homes, which have comprised a larger than usual share of inventory and sales, outperformed. New-home sales registered on par with a pace near what was typical in 2022 and 2023, while the pending home sales index hit its lowest level since counting began in 2001—suggesting this trend will continue. 

One last note, many are curious about the housing market effects of changes in the federal workforce. We’ve not yet seen an impact, but given the recency of the changes, I wouldn’t expect to see anything in the data just yet. 

In the Realtor.com February Housing Trends report, we ranked markets by the share of federal employees among all payroll jobs to have a lens through which to watch for changes in upcoming months.

We’re keeping our eyes on the following markets:

• Washington-Arlington-Alexandria, DC-VA, MD, WVA
• Virginia Beach-Chesapeake-Norfolk, VA, NC
• Oklahoma City, OK
• Baltimore-Columbia-Towson, MD
• San Diego-Chula Vista-Carlsbad, CA
• San Antonio-New Braunfels, TX

Punxsutawney Phil this week suggested that winter will stick around for a bit, and the same can also be said for several rates that are maintaining their levels.

This week, I’m going to cover the latest data on the U.S. labor market and mortgage rates, homeownership and housing inventory, and most importantly—tell you what it means for you. I’ll also highlight what Texas is doing right.

It might be cold outside, but the U.S. labor market remains pretty hot. Unemployment fell to 4% even as the number of jobs rose by only half as much as December. More importantly, for consumers, earnings continue to rise by more than 4%.

Even before the jobs data was released, Fed speakers this week reinforced what we learned last week. They believe the economy is on solid footing and aren’t in a rush to cut the policy rate. 

Meanwhile, Trump’s Treasury secretary this week noted that he and the president are focused on 10-year yields as a benchmark borrowing cost. This week, 10-year yields reached their lowest level since mid-December, and mortgage rates declined for a third straight week. Despite the declines, mortgage rates are still fairly close to 7%, and likely acting as more of a headwind than tailwind for home shoppers.

Homeownership rates remained high at the end of 2024 overall. Digging in deeper, however, we see that homeownership rates slipped for younger households, a sign of how challenging the market has become for first-time buyers amid a decade-long housing shortage. In fact, the homeownership rate for those aged 35 and under fell to the lowest level since before the COVID-19 pandemic.

THE Realtor.com® weekly housing data points to difficulties for buyers, too. For-sale homes this week spent more time on the market even as asking prices remain below their year-ago level. Of note, new listings growth pulled back from its recent pace, which suggests some easing of home sales is likely ahead.

Finally, in conjunction with the relocation of Realtor.com headquarters to Austin, TX, my team took a look at what the Lone Star State is doing that has attracted residents and businesses like ours to the area. Movers to Texas cited its affordable housing, jobs, and climate as major motivators.

You can find all the details, including full reports and our housing data for download, at realtor.com/research. You can also follow us on X (formerly Twitter) for real-time updates and Instagram for graphics.

Sales of newly built homes slumped dramatically in January, in another troubling sign for a housing market searching for signs of life in 2025.

Signed contracts for new single-family homes plunged 10.5% last month from December, to a seasonally adjusted annual pace of 657,000, the U.S. Census Bureau reported on Wednesday. The January sales figure was down 1.1% from a year earlier.

The median sales price of new houses sold in January was $446,300, up 3.7% from a year earlier. Last month’s typical sales price was the highest for any January on record, and the the highest of any month since October 2022, when an all-time high was reached.

Despite the sharp increase in new-home sales prices, median list prices for new construction are declining annually, as builders offer more homes with smaller floor plans, Realtor.com® data shows.

The divergence suggests that higher-end, more expensive new homes are selling faster, while smaller, more affordable builds are struggling to find qualified buyers.

Realtor.com senior economist Joel Berner notes that new homes in the $300,000 to $399,999 price range saw the biggest drop-off in sales last month, declining to 13% of all new-home sales in January from 16% in December.

“Much of this sales share was taken over by the $500,000 to $599,000 segment, which grew from 7% to 9% over the past month and pulled the median sales price further upmarket,” says Berner.

The slump in new-home sales follows data showing that January was also a disappointing month for closed sales of previously owned homes, which dropped 4.9% from December.

Although both new- and existing-sales figures are seasonally adjusted, unusually brutal weather in January might have played a role, after a series of winter storms slammed much of the country.

“The large fall in new-home sales in January was to be expected given the disruption from the unseasonably severe winter weather,” says Bradley Saunders, North America economist for Capital Economics.

“Indeed, the breakdown shows sales declined in all regions except the West, where the weather was relatively mild,” he adds. “While sales should rebound this month, elevated mortgage rates will limit the upside for buying activity this year.”

Mortgage rates do remain the housing market’s main villain, with the average rate on 30-year fixed home loans hovering above 6.8% since mid-December.

For homebuyers who had hoped the new year and new presidential administration would bring lower rates, so far there have been few signs of relief.

In a troubling development for homebuyers, mortgage giant Fannie Mae recently revised its 2025 forecast, projecting mortgage rates will average 6.8% across the year, dropping to 6.6% by year-end.

New-home sales drop everywhere but the West

Supporting the theory that severe winter storms depressed sales in January, every region saw declining monthly sales except the West, where new-home sales rose 7.7% from December.

The Northeast saw the sharpest decline, with sales of newly built homes dropping 20% in January from the prior month. Sales also declined 16.7% in the Midwest and 14.8% in the South.

Policy uncertainty remains a major overhang for the residential construction industry, as homebuilders wait to see how President Donald Trump‘s tariff agenda could affect the cost of imported building materials.

On the other hand, homebuilders are hopeful that Trump will follow through on his vows to cut construction regulations and extend tax cuts, moves that could reduce the cost of building homes.

“Home builders and remodelers are dealing with positive and negative risks in the months ahead,” says
Rob Dietz, chief economist of the National Association of Home Builders.

The NAHB on Tuesday projected that the number of new homes built in 2025 would remain virtually unchanged from last year, at 1.01 million.

That would mark an anemic pace of growth and is likely not enough to adequately address the nation’s housing shortage, which Freddie Mac recently estimated at a shortfall of 3.7 million units.

Still, industry observers expect new construction to continue to play a major role in the housing market this year, as new builds help fill the supply shortfall of existing homes.

“Though January 2025 was a more challenging month for new-home shoppers and sellers than the last few months of 2024, the newly built segment is still an especially attractive one compared to the existing home segment,” says Berner.

“Homes are easier to shop for with more months of supply on the market, prices remain competitive with the resale market, and purchasing a new build offers more customizability and a lower cost of ownership than existing homes,” he adds.

Texas Gov. Greg Abbott has taken aim at squatters, calling for tougher laws to protect private property from unwelcome interlopers.

In his annual State of the State address on Sunday, the Republican leader said he planned to crack down on squatters because it was a pressing “public safety” issue.

“Private property rights are a cornerstone of our values and legal system,” Abbott said. “It is against the law to live or stay on somebody’s property without their permission. We need stronger laws to immediately remove and prosecute squatters.”

State Sen. Paul Bettencourt and State Rep. Angie Chen Button, who have been working together on tightening anti-squatter laws, later thanked Abbott for making the issue a priority.

“It was great to hear @GregAbbott_TX name this issue a priority because it not only threatens community safety, it impacts housing affordability and availability,” Chen Button posted on X.

Bettencourt wrote that he was looking forward to joining forces with Chen Button to file a “strong anti-squatting bill” in both chambers of the Texas Legislature.

Squatters’ rights in Texas

A squatter is defined as anyone who takes over an unoccupied or abandoned property without legally owning or leasing it, or having permission from the lawful owner to stay there. 

Under current Texas laws, short-term squatting is illegal and could be cause for eviction and prosecution on charges of criminal trespass, theft, or mischief. 

However, squatters enjoy certain protections under both federal and state laws. Similar to other states, Texas has what is known as Squatters’ Rights, which outline the conditions under which a squatter can lay claim to someone else’s property through a mechanism called “adverse possession.”

To do that, the squatter must be physically present at the property and treat it like an owner would.  

The squatter also must make it obvious that they have been living on the property openly, on their own, and without the rightful owner’s permission.

Finally, the squatter must have resided on the property for a continuous, uninterrupted period of between three to 10 years, depending on the circumstances.

How other states are combating squatters

Nationally, squatting is relatively rare, but a 2024 study from the National Rental Home Council found that Dallas was among the cities with the highest number of squatting incidents, alongside Orlando, FL, and Atlanta, according to Newsweek.  

The study identified an estimated 475 homes in the Dallas-Fort Worth area alone that had been commandeered by squatters. 

Dislodging squatters from a property can be a difficult, time-consuming, and costly process, especially in states with robust protections for squatters, such as New York.

The growing outcry against the problem in the Big Apple prompted Democratic Gov. Kathy Hochul last April to sign a new law that clarified that squatters are not legal tenants. 

Around the same time, Georgia Gov. Brian Kemp, a Republican, signed into law the Georgia Squatters Reform Act to protect homeowners by making it easier for law enforcement officers to remove unlawful tenants. 

Tackling Texas’ broader housing issues

Back in Texas, Abbott on Sunday presented a raft of proposals for addressing the issues facing the state’s housing market beyond the squatting problem.

Abbott called for at least $10 billion in new property tax relief, which he designated as an emergency item that must be passed. At the same time, he scolded local taxing authorities for using loopholes to hike homeowners’ property taxes.

“Loopholes that increase your property taxes must be banned,” the governor declared. “No taxing entity should be able to raise your property taxes without a two-thirds approval by voters.”

Abbott also addressed the dearth of affordable housing in Texas, calling on lawmakers to make it easier to build homes, cut back on red tape, and speed up the permitting process. 

“And to make your current home more affordable, we should offer a one-year tax exemption on home improvements, like heating and air conditioning,” he added. 

In line with the rest of the U.S., Texas is suffering from a deep inventory shortage. According to a recent estimate by Up for Growth, the state was about 320,000 homes short to meet the demand for housing as of last fall.

The real estate scarcity has resulted in home prices and rents going up, even with Texas leading the U.S. in homebuilding. 

Mortgage rates dipped modestly this week after financial markets reacted with relief when President Donald Trump quickly suspended harsh new tariffs he had proposed against Canada and Mexico.

The average rate on 30-year fixed home loans dropped to 6.89% for the week ending Jan. 30, down from 6.95% the prior week, according to Freddie Mac. Rates averaged 6.64% the same week last year.

“Even though rates are higher compared to last year, the last two weeks of purchase applications are modestly above what we saw a year ago, indicating some latent demand in the market,” says Freddie Mac Chief Economist Sam Khater.

The modest decline in mortgage rates follows short-lived panic in financial markets after Trump announced massive new tariffs on Canada and Mexico over the weekend. But he suspended them on Monday after securing border security guarantees from the two U.S. neighbors.

Tariffs are viewed as inflationary, and if imposed, the new duties could have quickly driven up yields in the long-term bond markets that influence mortgage rates. Instead, those markets reacted with relief to the rapid pause, trending lower over the week.

“The recent announcement of, then pause in, tariffs had the potential to jostle the market confidence, which could have negatively impacted mortgage rates, but the timing managed to keep things rather uneventful,” says Realtor.com® senior economic research analyst Hannah Jones.

Despite the modest relief this week, mortgage rates have now remained close to 7% since the beginning of the year, frustrating expectations that they could fall closer to 6% over the winter months.

“Rates remained stubbornly high in recent weeks as markets anticipated and adjusted to the seemingly ever-changing economic environment,” says Jones.

Mortgage rates tend to move in tandem with the yields on long-term bonds, which change as investors adjust their expectations about the economy’s future, inflation, and government deficits.

“The 10-year Treasury yield moved lower over the last couple of weeks, which could allow mortgage rates to fall as well,” says Jones. “However, for the time being, high mortgage rates, stubborn home prices, and general economic uncertainty mean that many would-be home shoppers are staying on the sidelines.”

Continued softness for home prices

The Realtor.com economic research team’s weekly housing market update shows that for the week ending Feb. 6, the median list price of homes on the market nationally was down 1% from the same week last year.

It marked the 36th week in a row in which the national median home list price was flat or falling from the corresponding week last year, a stretch that dates to the beginning of June 2024.

As elevated mortgage rates dent buyer demand and homes sit longer on the market, sellers are also increasingly turning to price reductions.

The number of listings with price reductions rose 29% this week compared with the same period last year, with the overall share of listings with price reductions up 0.5%.

Despite the softness in price growth, home prices remain close to record highs, which, combined with high mortgage rates, is a significant pain point for buyers.

Listing activity and supply on the rise

The number of new listings hitting the market jumped 4.2% this week compared with a year ago, a sign that changing life and career circumstances are increasingly pushing sellers to list despite elevated mortgage rates.

New listing activity has jumped annually for each of the past four weeks, and so far this year, new listings are up 7.1% compared with the same period in 2024, setting up a more buyer-friendly start to the year.

The total supply of homes listed for sale is also rising, up 26.7% this week from a year ago.

With supply growing faster than demand, homes are staying on the market longer. Median days on the market slowed dramatically this week, with the typical home spending seven more days on the market compared with last year.

“Though housing costs remain eye-wateringly high, for-sale inventory continues to build, offering home buyers more options. Climbing inventory levels have created a bit more slack in the housing market, which is important for market balance,” says Jones. 

“Easing mortgage rates and climbing housing supply will both be important in improving housing affordability in the U.S.,” she adds.