2025 U.S. Real Estate Predictions: Mortgage Rates to Fall Modestly, But Not Enough to Solve Affordability Crisis
Mortgage rates are expected to fall modestly in 2025, according to Realtor.com’s forecast. However, the decline is unlikely to be enough to provide relief for many would-be buyers in the U.S.’s ongoing affordability crisis.
2025 U.S. Real Estate Predictions
Realtor.com’s 2025 housing forecast, released on Wednesday, predicts that the benchmark 30-year fixed rate mortgage will average around 6.3% in 2025, falling slightly to end the year at around 6.2%.
Zillow predicted a more active market with additional inventory for 2025, giving buyers more room to negotiate. However, homebuyers should expect some turbulence with fluctuating mortgage rates, even as more homes become available.
Mortgage Rates: A Notable Wildcard in 2025
However, the report flagged mortgage rates as a notable wildcard in 2025, saying that with policy and economic uncertainties ahead, mortgage rates could deviate from their forecast.
"As home prices stay high, housing affordability is going to be make it or break it for many households, and mortgage rates will be the factor that tips the scales for many buyers and sellers, too," Realtor.com’s chief economist, Danielle Hale, told FOX Business.
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Freddie Mac’s latest Primary Mortgage Market Survey released last week showed that the average rate on the popular 30-year fixed mortgage is at 6.81%. While that is an improvement over the 7.22% long-term mortgages averaged a year ago, many would-be buyers and sellers are still holding out. Currently, about 80% of mortgage holders have a rate below 5%, according to a Zillow survey from earlier this year.
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Hale said the anticipated improvement in rates in 2025 will keep housing costs roughly stable and, combined with higher incomes, will support modest improvement in affordability that will help home sales edge somewhat higher next year.
"The modest decline in mortgage rates will not support a big reset in the lock-in effect for existing homeowners, but time and life-events are expected to cause the share of outstanding mortgages under 6% to fall from 84% in mid-2024 to 75% by the end of 2025," Hale said.
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"To the extent that mortgage rates ease faster, we expect that to support more home sales growth, but if mortgage rates remain higher, that would hold home sales back," Hale added.
Conclusion
While mortgage rates are expected to fall modestly in 2025, the decline is unlikely to be enough to provide relief for many would-be buyers in the U.S.’s ongoing affordability crisis. The report highlights the importance of policy and economic uncertainties in determining mortgage rates and their impact on the housing market.
Frequently Asked Questions
Q: What is the predicted average 30-year fixed rate mortgage for 2025?
A: According to Realtor.com’s forecast, the average 30-year fixed rate mortgage will be around 6.3% in 2025, falling slightly to end the year at around 6.2%.
Q: What are the expectations for the housing market in 2025?
A: Realtor.com’s 2025 housing forecast predicts a more active market with additional inventory, giving buyers more room to negotiate. However, homebuyers should expect some turbulence with fluctuating mortgage rates.
Q: What is the current state of mortgage rates?
A: Freddie Mac’s latest Primary Mortgage Market Survey showed that the average rate on the popular 30-year fixed mortgage is at 6.81%, an improvement over the 7.22% long-term mortgages averaged a year ago. However, many would-be buyers and sellers are still holding out.
Q: What is the impact of mortgage rates on the housing market?
A: According to Realtor.com’s chief economist, Danielle Hale, mortgage rates will be the factor that tips the scales for many buyers and sellers, making it a crucial aspect of the housing market.
