"Mortgage rates may stabilize post-election; here's a 2025 outlook."

Mortgage rates may stabilize following the election, signaling potential shifts in the housing market. Explore trends and projections for early 2025.

Mortgage rates appear to have stabilized, a potentially positive indicator for the housing market, according to experts. The average 30-year fixed-rate mortgage in the U.S. fell slightly to 6.78% for the week ending November 14, just a minor change from the previous week’s 6.79%, based on Freddie Mac data via the Federal Reserve.

“Although rates remain higher than in recent weeks, this could be favorable news for buyers,” said Jessica Lautz, Deputy Chief Economist and Vice President of Research at the National Association of Realtors. Lautz added that significant rate fluctuations can create uncertainty in the housing market.

Earlier this fall, mortgage rates dropped in anticipation of the first interest rate cut since March 2020 but spiked again after the bond market reacted to Donald Trump’s election win. While the president-elect has expressed interest in lowering mortgage rates, experts clarify that presidents do not directly influence home loan borrowing costs. Instead, mortgage rates typically align with Treasury yields and are partly impacted by changes in the federal funds rate.

“The bond market factors in inflationary policies like tariffs, government spending, and tax changes, leading to higher inflation expectations,” explained James Tobin, President and CEO of the National Association of Home Builders. “Mortgage rates tend to follow those trends as the bond market reacts.” Chen Zhao, Chief Economist at Redfin, noted that reduced volatility in rates is often a positive signal.

“When volatility is high, mortgage rates tend to rise even further above Treasury yields,” Zhao said. “Stable rates allow buyers to plan their budgets more confidently.” Representatives for Trump’s team did not respond to a request for comment.

Expecting significant mortgage rate drops isn’t realistic, said experts, even though the election uncertainty initially caused a sharp rise in rates during October. Rates climbed further last week as financial markets and bond yields adjusted to the election results. On November 6, the 10-year Treasury yield rose by 15 basis points to 4.43%, marking its highest level since July, as investors anticipated increased economic growth and fiscal spending under Trump. Similarly, the 2-year Treasury yield increased by 0.073 basis points to 4.276%, its peak since July 31.

Lautz suggested that with a president-elect now confirmed, mortgage rates could gradually decrease over time. Federal Reserve Chair Jerome Powell indicated that policymakers plan to proceed cautiously with future rate cuts, given the robust economic growth in the U.S. If the Federal Reserve continues reducing the federal funds rate, it could indirectly push mortgage rates lower, according to NAHB Chief Economist Robert Dietz. However, Dietz warned that stronger economic growth or larger government deficits could drive rates higher instead.

Experts anticipate a “bumpy” or “volatile” trajectory for mortgage rates over the coming year. “It’s unlikely that rates will drop significantly into the 5% range,” Lautz said. “We expect them to hover around 6% as we enter 2025.”

Buyers, sellers, and homeowners may find opportunities in the current environment. Lower rates can benefit long-term buyers, especially during the quieter winter season when competition typically decreases, Lautz said. Homebuyers often hesitate to move during the school year, creating an opportunity for other buyers. U.S. homeowners with mortgages have accumulated a record $17.6 trillion in home equity as of the second quarter of 2024, CoreLogic reports. Home equity rose by $1.3 trillion year-over-year in Q2 2024, an 8.0% increase. Lautz suggested sellers offset higher borrowing costs for new homes by making larger down payments.

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Source: CNBC‍