By WWLT
The first quarter of 2025 was characterized by inconsistency. Interest rate cuts, a stock market rollercoaster, and a slowing real estate market have made buyers and sellers uncertain about what the future holds. Will home prices continue to rise? Will mortgage rates drop? Will the housing supply situation improve? The team at World Wide Land Transfer has our predictions about mortgage rates for 2025 and more insights into the overall real estate market.
Historically, when the Federal Reserve cuts its benchmark interest rate, mortgage rates go down in step with it. That was not the case from late 2024 into 2025. After a series of rate hikes in 2023 that sent mortgage rates higher, the Fed cut rates three times in 2024 for a total of 100 basis points. Instead of seeing a corresponding drop in mortgage rates, the average rate for a 30-year fixed mortgage has remained at around 6-7% since 2023.
The next meeting of the Federal Open Market Committee (FOMC), after which the Fed’s benchmark interest rates are usually announced, is scheduled for May 6th, 2025. While many analysts expect the Fed to keep interest rates the same, anything could happen at this meeting, and it will most certainly have an effect on the real estate market. If they keep rates the same, as expected, mortgage rates will likely continue to hover around 6-7% as they have for the past 2 years. That will mean a continuation of current real estate market trends and a continued gradual slowing from the highs of 2020 to 2022.
If, on the other hand, they decide to raise rates to combat inflation, it could mean an even more severe slowing of the real estate market. Conversely, a rate cut could lower mortgage rates and encourage borrowing, leading more Americans to purchase homes, even as housing prices have remained high.
As homes for sale were quickly snapped up in the post-pandemic environment, the housing supply dwindled heading into 2025. Experts expect that trend to slowly reverse, although proposed tariffs that would affect building materials could upset the established order. If home builders can’t increase the housing supply, prices will likely continue to rise. Although home values are likely to rise, prices will probably not grow as quickly as they did in the hot post-pandemic real estate market. A range of economic pressures will make potential homebuyers more likely to stay put, and that decreased demand will mean that any rise in real estate sale prices will be relatively moderate.
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World Wide Land Transfer is a service-oriented PA title company with offices in Philadelphia, New York, and Washington, D.C. With a record of going above and beyond, we are trusted to close everything from complex commercial transactions to residential refinance and purchase transactions.
