According to Freddie Mac, the 30-year average mortgage rate increased again this week, nearing 7%. As we approach the holidays, demand for home purchases will likely slow. Although available listings are rising slightly, the high interest rate environment has slowed new construction.

Source: Freddie Mac (November 2024)

Candyd Mendoza of MPA reports on rising rates, highlighting that despite elevated rates, home sales surged in October as buyers capitalized on rate dips in September, marking the first annual sales increase in over three years. Existing home prices rose 4% year-over-year to $407,200, while inventory grew modestly, offering buyers more options. However, high rates continue to dampen new construction and overall demand heading into the holidays.

Bryan Mena of CNN reports on forecasts from Wells Fargo and Fannie Mae, showing that mortgage rates are expected to remain above 6% for at least the next two years. Rising rates, persistent home-price growth, and limited borrowing relief have contributed to the weakest home sales since 1995. While the labor market remains strong and inventory is improving, elevated borrowing costs continue to pose challenges for prospective buyers, signaling a tough market for those hoping to achieve homeownership soon.

Indeed, mortgage rates are expected to remain elevated for the foreseeable future, with projections of around 6.8% in 2025, according to Jarrell Dillard of Bloomberg. Proposed tariffs and labor shortages in construction could push inflation and home prices higher, further straining the housing market. However, optimism among homebuilders over potential regulatory relief and post-election activity from buyers and sellers provide some hope for increased market momentum despite the high-rate environment.

Jeff Andrews of HousingWire reports on the Mortgage Bankers Association’s (MBA) revised interest rate forecast for 2025. Now, rates are projected to remain between 6.4% and 6.6%, up from earlier expectations of 5.9% to 6.2%. This adjustment reflects reduced optimism about Federal Reserve rate cuts, particularly after Donald Trump’s election and his proposed tariffs, which economists warn could reignite inflation. MBA also lowered its 2025 mortgage origination volume and home sales forecast, aligning with similar downward revisions from Fannie Mae and others. 

Source: HousingWire (December 2024)

Insurance costs

According to S&P Global, insurance costs are rising due to climate-related losses and higher reinsurance costs. This is exacerbating housing affordability challenges and could strain local government creditworthiness. With over 55% of lower-income households already housing-burdened, escalating premiums and diminishing coverage may lead to demographic shifts, dampened property values, and slower economic growth. 

Source: The Conversation (November 2024)

Chris Clow of HousingWire reports on the topic, highlighting that home insurance premiums continue to rise. Still, the pace of increases has slowed, signaling potential market stability, according to an analysis by Matic. Many insurers have returned to profitability in 2024 after state-approved rate hikes and moderating inflation reduced repair and material costs. While the average homeowner’s premiums have risen 69% since 2021, the growth rate has tapered, with increases dropping from 10.7% in early 2024 to 6.6% by November.

Craig Berry and Aleksandra Kadzielawski of Mortgage Reports show that natural disasters drove a surge in homeowner insurance costs, particularly in high-risk states like Florida and Louisiana. From 2021 to 2023, average annual premiums increased nearly 20%, with another 6% rise projected by the end of 2024, according to Insurify. Florida faces the steepest costs, with premiums expected to surpass $11,700 annually—more than five times the national average—while Louisiana anticipates a 23% increase to over $7,800 annually. 

Leslie Shaver of Multifamily Dive reports on the topic, noting that insurance costs for multifamily properties stabilized in 2024, offering temporary relief for apartment owners. Camden, a Houston-based REIT, saw insurance costs decline by 3% this year, a significant shift from last year’s 40% spike. Similarly, Memphis-based MAA renewed its property and casualty program with a 1% premium decrease. However, experts warn this trend may not last. Gallagher’s Summer Market Update projects a 10-20% increase in multifamily primary liability insurance rates and a 10-15% rise in umbrella rates for 2025. 

Rent data

According to Realtor.com, median rents for 0-2 bedroom properties fell year-over-year for the fifteenth consecutive month in October, with asking rents down $14 (-0.8%) from last year, reaching $1,720 across the top 50 metros. This decline reflects a broader trend of decreasing rental prices and increasing supply, with multifamily completions and rental stock expected to rise through 2025. Key data points include:

• Median Rent: $1,720 in October 2024, down $23 from September and $40 lower than the August 2022 peak.
• Year-over-Year Declines by Unit Size: Studio rents dropped 1.2% to $1,436; 1-bedrooms fell 0.9% to $1,600; 2-bedrooms decreased 0.7% to $1,908.
• Rental Stock Growth: Expected to increase by 1.1% (to over 49 million units) by fall 2025, up 6.7% from pre-pandemic levels in fall 2019.
• Regional Growth in Rental Stock: South (+1.5%), West (+1.2%), Midwest (+0.9%), Northeast (+0.7%) projected by fall 2025.
• Comparison to Pre-Pandemic Levels: Median rents remain $272 (+18.8%) higher than in 2019, aligning with a 22.7% rise in overall consumer prices but far below the 50.5% increase in for-sale home listing prices over the same period.

The Zumper National Rent Index for October 2024 shows a seasonal slowdown in rental prices, with the median one-bedroom rent flat at $1,534 and two-bedroom rents declining 0.4% to $1,902. Notably, New York City saw its first one-bedroom rent decrease in six months (-2.9% to $4,370), while San Francisco (-2.9%) and Miami (-3.7%) also experienced declines, reflecting the typical shift to low-demand months.

• National Trends: One-bedroom rents flat at $1,534; two-bedroom rents are down 0.4% to $1,902.
• New York City: One-bedroom rents dropped 2.9% to $4,370, the first decline in six months.
• San Francisco and Miami: San Francisco’s rent fell 2.9% to $3,020, while Miami’s dropped 3.7%, ranking 6th most expensive.
• Seasonal Trends: November marks the start of low-demand months, with rents expected to continue modest declines through early 2025.

Source: Zumper (November 2024)

Zumper CEO Anthemos Georgiades comments: “Our national rent index showing flat to declining monthly rates is a clear sign of a shift into the slow moving season…We anticipate that national rents will continue to see modest declines through the rest of this year and likely into the beginning of next year as well.”

Finally, according to the National Association of Home Builders (NAHB), single-family built-for-rent (SFBFR) construction saw significant growth in Q3 2024, with 24,000 starts—up 41% year-over-year—as builders responded to elevated mortgage rates and rising demand for rental housing. Over the last four quarters, SFBFR starts totaled 92,000, a 31% increase compared to the prior year, marking a notable rise in this niche market’s share, now averaging 9%, up from the historical average of 2.7%.

Source: NAHB (November 2024)

“With the onset of the Great Recession and declines for the homeownership rate, the share of built-for-rent homes increased in the years after the recession. While the market share of SFBFR homes is small, it has clearly expanded. Given affordability challenges in the for-sale market, the SFBFR market will likely retain an elevated market share even as the rest of the building market expands in the coming quarters.”