Dana Anderson of Redfin reports on the lack of housing supply, citing a survey that reveals that 34% of U.S. homeowners say they’ll never sell their home, with baby boomers most likely to stay put (43%). Primary reasons include having nearly paid off their mortgage (39%), enjoying their current home (37%), and being deterred by high housing costs, with home prices up roughly 40% since the pandemic and mortgage rates near 7%. The trend has contributed to historically low home turnover, with just 25 of every 1,000 U.S. homes changing hands in the first eight months of 2024, the lowest rate in decades.
Source: Redfin (January 2025)
Another Redfin report reveals that the housing market experienced significant cooling in early January 2025, with Redfin’s Homebuyer Demand Index dropping 11% month-over-month and pending home sales declining 8.4% year-over-year. This is the most significant drop since October 2023. Despite challenging market conditions—including high housing costs with the median sale price up 5.8% and median monthly mortgage payment at $2,586—there are emerging positive signals, such as mortgage-purchase applications rising to their highest level in nearly a year and mortgage rates potentially softening after a recent inflation report.
Casey Farmer of Mansion Global reports that the market deceleration is attributed to high mortgage rates and extreme weather conditions, including wildfires in Los Angeles and cold temperatures across the country. The median home sale price has increased to $379,609, and daily average mortgage rates have reached their highest level since May, contributing to reduced buyer demand and fewer new listings.
The U.S. Census Bureau reports a slight decline in building permits, with privately-owned housing units authorized at a seasonally adjusted annual rate of 1,483,000 in December, down 0.7% from November and 3.1% from December 2023. Housing starts showed more resilience, increasing 15.8% month-over-month to 1,499,000 in December, though still 4.4% below the previous year’s rate. Single-family housing metrics were positive, with single-family authorizations rising 1.6% and single-family starts increasing 3.3% in December.
Hannah Jones of Realtor.com reports that two-thirds of Americans still aspire to homeownership, with approximately 59% believing it is achievable. The survey indicates a significant shift in the housing market, with the median homebuyer age reaching a new high of 56 years and first-time and repeat buyer ages at 38 and 61 years, respectively. Despite challenges, over half of respondents across generations view homeownership as a pathway to long-term wealth, with 75% considering it part of the American dream.
Source: Realtor.com (January 2025)
New construction
Logan Mohtashami of HousingWire reports that rising mortgage rates, now nearing 7.25%, are dampening builder confidence despite housing starts exceeding expectations in December 2024. Housing starts rose 15.8% month-over-month to a seasonally adjusted annual rate of 1.499 million but remain 4.4% below December 2023. Building permits, a forward-looking indicator, dropped 0.7% from November and 3.1% year-over-year.
Joel Berner of Realtor.com reports on the same data, highlighting that builders faced a challenging December 2024 amid rising mortgage rates and political uncertainties under the incoming administration. Despite these headwinds, builders focused on completing projects, delivering over 1.6 million new homes in 2024 and relieving buyers struggling with a low existing home inventory.
Source: Realtor.com (January 2025)
Orphe Divounguy of Zillow reports that single-family housing starts rebounded in December 2024, reaching an annualized rate of 1.05 million—the highest level since 2021—ending the year with a 3.3% monthly increase. Despite this, overall housing starts in 2024 were 3.9% lower than in 2023, with multifamily starts declining due to a backlog of projects and easing rent growth. Builder optimism persisted despite rising mortgage rates pushed higher due to inflation concerns and economic uncertainty.
Kennedy Edgerton of HousingWire reports that demand for new homes showed resilience in December 2024, with purchase mortgage applications rising 8.9% year-over-year despite a 3% monthly decline, according to the MBA. This marked the second consecutive month of annualized growth for new-home purchase applications. An estimated 46,000 new homes were sold in December, down 6.1% from November, while the seasonally adjusted annualized sales rate fell 15.7% to 601,000 units.
Mortgage rates update
Laurel Wamsley of NPR reports that mortgage rates climbed back above 7% last week despite recent Federal Reserve rate cuts aimed at easing borrowing costs. This rise highlights the disconnect between Fed rate cuts, which influence short-term rates, and mortgage rates, which track the 10-year Treasury yield. Sticky inflation, strong economic performance, and concerns over future rate cuts have increased Treasury yields, driving up mortgage rates.
Source: NPR (January 2024)
“For now, it’s hard to see bond yields going down substantially. The Fed has projected it will cut interest rates only two more times this year, which would likely keep bond yields higher. That means mortgage rates could also stay higher, which would be bad news for homebuyers.”
Diana Olick of CNBC reports that mortgage demand shows mixed trends as interest rates reach their highest level since May 2024. The 30-year fixed mortgage rate rose to 7.09%, up from 6.99% the previous week. While total mortgage application volume is 7% higher than the same period last year, driven in part by a 22% increase in refinance applications, purchase mortgage applications are down 2% year-over-year.
Logan Mohtashami of HousingWire reports on interest rates, highlighting that they did fall slightly last week after months of increases. This raises questions about whether this signals a downward trend or a temporary pause before the spring home-buying season. The drop was driven by bond market reactions to slightly weaker-than-expected inflation data, retail sales misses, and mixed economic reports. Despite the recent dip, mortgage rates remain elevated, with 2025 forecasts projecting a range of 7.25%-5.75% for rates and 4.70%-3.80% for the 10-year yield.
Indeed, Sharon Wu of CBS News reports that experts are divided on whether mortgage rates will fall below 6% in 2025. While some, like Chris Heller of Movoto.com, believe a gradual decline is possible, others, such as Emanuel Santa-Donato of Tomo Mortgage, view it as unlikely based on historical trends. The Mortgage Bankers Association predicts rates will remain between 6% and 7% throughout the year.
Bryan Mena of CNN agrees that there is unlikely to be interest rate relief for the foreseeable future. “Buyers could be stuck waiting a while for any meaningful relief: Economists do not expect the housing market to improve much this year as mortgage rates will likely remain above 6% through 2026. That dashes any hopes of homeownership for first-time buyers and low-income households living in metropolitan areas seeing rapid home-price growth such as New York and San Diego.”