I always like to get these reports out to you as early in the year as possible. However, the fires that started on January 7 have totally upended the market! Though we have yet to get an exact figure, it’s clear that thousands of people lost their homes locally. We’ve already seen the rental market flooded, and unfortunately some people are taking advantage of the situation and breaking price gouging laws. It’s too soon to see this affect existing homes for sale supply, but it will reduce the already low inventory supply dramatically, making further price acceleration very likely.
Key Takeaways
• Mortgages are forecasted to remain higher for longer; but there are things you can do to lower your rate.
• Home values are predicted to increase; and there are projects you can do to further increase your home’s value.
• The local market will favor sellers in negotiations
• Note: real estate is a dynamic market and forecasts made in this article will change as the year unfolds.
Mortgage Rates Will Average 6.4% in 2025
In 2023, the average 30-year mortgage peaked at 7.79% following the pandemic. Rates came down from that peak in 2024. What will mortgage rates do in the next year?
The Federal Reserve is predicted to lower the federal funds rate 6 to 8 times in 2025; but mortgage rates are not set by the Federal Reserve and may not drop significantly (National Association of REALTORS®).
Fannie Mae predicts mortgage rates to average 6.4% in 2025. Mortgage Bankers Association also predicts mortgage rates to average 6.4%, but with slightly higher rates compared to Fannie’s forecast.
When Will Mortgage Rates Drop Back to 3%?
Historically, rates have never been as low as the pandemic era interest rates. 30-Year mortgage rates averaged between 4% and 6% during & after the housing crisis and Great Recession. A return to a 3% range is very unlikely.
Tips to get a better mortgage rate…
While we can’t affect the average 30 year mortgage rate, you can improve your credit and get the best possible rate. Here’s an example of recent mortgage rates by credit score:
If you’re thinking of making a move, the earlier you talk to a mortgage finance professional, the more time you have to work on improving your credit to get a better rate.
Need a recommendation to a trusted lender? Send me a message.
Tips for Potential Home Buyers
If you’re thinking of purchasing a home, the sooner you start planning the better. Knowing your price range, optimizing your credit, and working towards your downpayment are steps you can take now. Even if you’re in the market to buy in the next 12 to 24 months, talking with a real estate professional early in the process will set you up for success.
Tips for Potential Home Sellers
Sellers need to prioritize their objectives. Is getting top dollar for your home the highest priority, is it moving within a specific timeframe? Do you have to sell a home prior to purchasing your next one? These objectives must be prioritized so that an effective plan and marketing strategy can be put into place. Thinking of making a move, give me a call!