Mortgage originators waiting for the housing market to thaw will likely have to wait a bit longer still, given the Federal Reserve's higher-rates-for-longer stance. There’s more evidence of a frosty housing market at the start of 2025, as affordability and other challenges persist.
Market activity was “sluggish” to start the year, reported Bright MLS, a real estate multiple listing service, as mortgage rates have remained high and economic and political uncertainty may be causing some to reevaluate the timing on a home purchase or sale.
The company, which covers the Mid-Atlantic region, noted the housing market has begun the year with a degree of “uncertainty.”
According to Bright MLS’s regional data, just over 13,000 transactions on homes closed in January, which is an 8.5% increase over January 2024, but reflects offers made on homes at the end of the year. However, new contract activity slowed in January, with about 15,000 new pending contracts last month, down 5.2% compared to a year ago.
Still, there’s reason to believe things could turn up as the year wears on.
"There is a lot of pent-up demand in the market, and many buyers who have been on the sidelines were hoping 2025 would be their year," stated Dr. Lisa Sturtevant, chief economist at Bright MLS, in a release. "Economic uncertainty and affordability challenges are going to cause some of those buyers to put off their purchase until later in the year."
While high mortgage rates around 7% have contributed to a slow housing market to begin the year, “rates will likely come down this spring, but there could be a lot of volatility in the interest rates borrowers see,” according to Bright MLS’s report.
The company’s latest report echoes findings from others. Real estate brokerage Redfin found that for the four weeks ending on February 2, new listings of U.S. homes for sale rose 7.9% from last year, but a lack of sales is contributing to a growing pool of housing supply.
Consumers appear to be settling in with the notion that high rates and costs could be here to stay. After a surge in mortgage rate optimism in the second half of 2024, the net share of consumers who believe mortgage rates will go down in the next 12 months declined 13 percentage points in January 2025, according to Fannie Mae’s latest Home Purchase Sentiment Index (HPSI).
In addition, the share of consumers who expect rental prices to go up increased 8 percentage points from last month to 65%.
