Turning the page on another year is going to have a different feel for the real estate industry compared to the start of 2024.
A year ago, 30-year fixed-rate mortgages were averaging 6.61%, with an expectation that rate cuts were coming soon. This week Freddie Mac’s rate average was 6.85%, with expectations that it will remain elevated for the start of 2025 even after three interest rate cuts this fall.
The question now becomes whether home sellers and buyers adjust to this new normal of elevated rates. There are some signs that it is happening, said Mark Fleming, chief economist at First American.
“Buyers and sellers are gradually returning, supported by a healthy labor market and more homes for sale compared to last year,” Fleming said. “The result is steady, single-digit house price growth, reflecting a market returning to normal following the pandemic-to-post-pandemic roller-coaster ride.”
However, if homeowners continue to hold onto their locked-in low rates, inventory will tick back down and prices will keep rising in 2025, said Redfin Senior Economist Sheharyar Bokhari in a home price index report. The report noted that home prices grew 0.5% in November and is up 5.7% year-over-year.
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Author: Dave Gallagher
