Interest rates were reduced by a quarter of a percentage point. (iStock )
of the fed just cut interest rates One more time this year. The Fed decided to cut interest rates by a quarter of a percentage point at its recent meeting, bringing interest rates down to 4.25% to 4.5%. The move had been widely anticipated by economists.
The Fed cited other indicators of economic expansion and a easing labor market following the rate cut. This is the third rate cut this year, but economists don't expect there to be as many cuts in 2025.
MBA Senior Vice President and Chief Economist Mike Fratantoni said in a statement: “The median member currently expects only two cuts in 2025, with the federal funds goal of 3% over the long term. “There is,” he said. “MBA expects the federal funds rate to fall only to 3.75% this cycle.”
Unemployment also remained low and inflation was making slow but steady progress toward the committee's 2% target, both of which bottlenecked the final decision to cut interest rates.
“Unemployment has been on the rise over the past year and inflation has been on the decline, but in recent months inflation has plateaued,” Fratantoni said. “It is not surprising that there was opposition at this meeting, with one member voting in favor of keeping interest rates on hold.”
With this rate cut, the Fed hopes to inch toward a rise in inflation and ease unemployment.
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Home sales expected to increase in 2025
Although the housing market has faced a roller coaster over the past year, certain aspects are expected to increase home sales in 2025. Experts predict a slow thaw in mortgage ratesThis gives prospective buyers more flexibility, as prices have fallen off the market in recent years.
There are signs that the market will improve in the new year, with many housing market indicators trending closer to historical norms. Although the number of listings is still lower than before the pandemic, it is significantly higher than in March, when the stock was 25% in the red. According to Zillow.
However, buyers shouldn't expect a completely smooth path when purchasing in 2025. For many, 2025 looks eerily similar to the volatile markets of 2024.
“There's a strong sense of déjà vu heading into 2025,” said Skyler Olsen, chief economist at Zillow. “Mortgage rates are once again expected to gradually improve, and opportunities for buyers should continue, but the path is “We should be prepared for many difficulties.” .
This is advantageous for shoppers looking to move during the slow winter months. Sellers who have been waiting for interest rates to drop may be looking to sell their homes while rates are lower.
“People shopping this winter have plenty of time to make their choices and are in a relatively good bargaining position,” Olsen said.
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The U.S. added 818,000 fewer jobs this year than originally estimated.
Mortgage rates and home prices are expected to fluctuate over the next year
More properties may be listed in the future, but buyers shouldn't expect mortgage rates to hit rock bottom anytime soon. There are no plans to lower the price yet. Prices are expected to rise by 3.7%, Realtor.com recently reported.
Mortgage rates are also expected to remain in the 6% range throughout the year, similar to 2024. According to Realtor.com, these small improvements are expected to increase the number of single-family home listings by nearly 14 percent.
Sellers in certain highly popular sectors will still be in power in 2025. Stocks are improving, but still limited compared to past years. This gives the seller an advantage when negotiating price.
It's difficult to predict how the latest presidential administration will factor into the housing market recovery process, but what Realtor.com calls a “Trump bump” is a possibility.
“President-elect Trump can work quickly with the administration to implement some regulatory changes, but other policies impacting housing, such as tax changes and broader deregulation, will require other sectors to implement,” said Realtor.com's chief economist. We need cooperation at the government level.” Daniel Hale said.
“The scale and direction of Trump's backlash will depend on what proposals from his campaign end up becoming policy, and when,” Hale said. “For now, we expect housing market dynamics to gradually improve due to broader economic factors. The new administration's policies could help or hinder the housing recovery, and the details will be important. ”
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