Mortgage rates this week experienced the most dramatic decrease since mid-December, signaling that despite the skyrocketing inflation and concerns over the Trump administration’s tariff policy, the housing market is turning more buyer-friendly.

The average rate on 30-year fixed home loans decreased to 6.76% for the week ending Feb. 27, down from 6.85% the week before, according to Freddie Mac. Rates averaged 6.94% the same week in 2024.

“This week, mortgage rates decreased to their lowest level in over two months,” says Freddie Mac Chief Economist Sam Khater. “The drop in mortgage rates, combined with modestly improving inventory, is an encouraging sign for consumers in the market to buy a home.”

Mortgage rates have hovered just below the 7% benchmark for several months now, and this trend is expected to continue for the foreseeable future.

“Though mortgage rates have fallen over the past several weeks and look a bit more promising to prospective homebuyers, we are far from the home finance environment of the post-pandemic homebuying frenzy when rates were below 4%, and we are unlikely to return,” says Realtor.com® Senior Economist Joel Berner.

Existing and new home sales have struggled to get off the ground in the first two months of 2025, in large part due to the high mortgage rates.

At the same time, elevated consumer inflation and the uncertainty surrounding President Donald Trump‘s oft-repeated threats to impose crushing tariffs on a wide array of imports, including vital construction materials, are doing nothing to boost the sagging housing market.

“Buyers, who are doing the budget math to find how much home they can afford under the pressure of high mortgage rates, and sellers, many of whom are unmotivated to move because of the favorable rates they purchased at a few years ago, are stuck in the mud early in 2025,” says Berner.

Mortgage rates are influenced by many different factors, including the 10-year Treasury yield, inflation, the overall health of the economy, as well as policy shifts.

Falling Treasury yield foretells slowdown

This week’s slight decline of mortgage rates closely followed the falling yield on the 10-year Treasury, pointing to an anticipated economic slowdown, which could be a blessing in disguise, according to Lisa Sturtevant, chief economist at Bright MLS, the regional listing service that covers the mid-Atlantic.

“Although a slowing economy may not seem like a good thing, lower rates could give the housing market the shot in the arm that it so desperately needs,” Sturtevant tells Realtor.com.

The economist predicts that mortgage rates will likely continue to decrease in the coming weeks but not drastically.

“A severe shock that leads to an economic recession could bring rates down faster, but that seems very unlikely at the moment,” adds Sturtevant. “Rather, consumers should accept rates that are volatile week-to-week, but that are gradually moving lower.”

Home prices falling as inventory grows

The latest weekly housing trends update on Realtor.com shows that the median home list price nationwide fell by 1% during the week ending on Feb. 22 from the same time last year.

This marks the 39th week in a row that the national median home list price has either remained flat or declined compared to the same week last year.

With would-be homebuyers continuing to sit on the sidelines, sellers are growing more attuned to the shifting market and are showing a willingness to slash prices in a bid to boost interest.

The share of homes for sale with price reductions was higher this month than in any February since 2016, reaching 16.8%, according to the Realtor.com February 2025 Monthly Housing Trends Report.

“For buyers, this trend presents an opportunity to secure homes at more favorable prices,” says Realtor.com Economic Data Manager Sabrina Speianu.

Meanwhile, new listings ticked up by 2.5% year over year, marking the seventh consecutive week of growth—and showing that home sellers are gaining confidence despite the high mortgage rates.

The overall number of homes for sale across the U.S. jumped by 27.7% compared to the same period in 2024. Combined with the steady influx of fresh inventory, that means house hunters have more options to choose from heading into the spring buying season.

Homes sitting unsold longer than before

For-sale homes waited for a buyer 11 days longer during the week ending on Feb. 22 compared to the same period last year—a trend that has persisted for 44 consecutive weeks.

With the inventory piling up, buyers have increasingly more options when shopping around for a home—and also more leverage, putting pressure on sellers to price competitively.

“Buyers are in a better position to take their time, thoroughly evaluate options, and negotiate deals that better suit their budgets,” says Speianu.

Overall, Realtor.com researchers predict that the real estate market may continue to soften; but at the same time, the lower prices could attract more customers this spring and get the inventory moving.

Search Homes in Colorado

Search Homes in North Carolina

Search Homes in Oklahoma

December jobs data is expected to cool, but how will Fed officials respond at their next meeting?

The new year has arrived, but little has changed regarding the direction of mortgage rates and their impact on the U.S. housing market.

At HousingWire’s Mortgage Rates Center on Tuesday, the 30-year fixed rate averaged 7.09%. That was up 2 basis points (bps) from a week ago. The 15-year fixed rate was slightly higher at 7.11% and was up 11 bps in the past week.

“The 10-year yield is currently close to my peak forecast of 4.70%. However, mortgage rates have not reached my peak prediction of 7.25% because mortgage spreads have improved in the early part of the year,” HousingWire Lead Analyst Logan Mohtashami wrote. “If mortgage spreads had been as unfavorable as they were in 2023, mortgage rates would be around 8% instead of near 7%.”

Mortgage rates have continued to rise since the Federal Reserve meeting on Dec. 18, when the central bank cut benchmark rates by 25 bps to a range of 4.25% to 4.5%. The Fed has implemented a total of 100 bps in cuts over its past three meetings, but mortgage rates have not moved in tandem. The 30-year fixed rate, for instance, has jumped by 78 bps since the rate-cutting cycle began in mid-September.

Market observers believe that the cuts will be paused when the Fed meets again at the end of January. On Tuesday, the CME Group’s FedWatch tool showed that 95% of interest rate traders predict no cut this month. Looking ahead to March, 37% of traders believe there will be an additional 25-bps cut that would lower the federal funds rate to a range of 4% to 4.25%.

The next employment report from the U.S. Bureau of Labor Statistics (BLS) will be released Friday and should provide some direction to Fed policymakers before their next meeting. A Reuters poll of economists calls for 150,000 new jobs to be added in December, down from a figure of 227,000 in November.

Last week, the labor department reported a seasonally adjusted annual rate of 211,000 unemployment claims — a lower-than-expected figure which signaled that “the labor market isn’t breaking,” according to Mohtashami.

“For mortgage rates to go lower, we need to focus on the labor market, which has been critical to every economic cycle in recent history, and particularly the labor market for residential construction and remodeling,” Mohtashami wrote.

“The existing home sales market has been in a recession since June 16, 2022, and hasn’t experienced any significant growth in sales for some time. However, the labor market for those working in in the existing home sales market isn’t substantial enough to impact an economy, since it is a sector that revolves around a transfer of commission.”

There weren’t any surprises in regard to home sales or new listings during the typically slow holiday season, according to Altos Research President Mike Simonsen. Altos data showed a weekly average of 44,000 new pending sales in December, nearly unchanged from the same period last year. Simonsen said he expects activity to rise next week.

“In ‘normal’ years, it’d be early February before inventory hits the absolute low point and starts climbing for the spring,” Simonsen wrote Monday. “When demand was hot during the pandemic, inventory might not reach its low point until March or April. In those times, we just had far more buyers than sellers. That’s not true now, so we should expect inventory to begin building for the year in February 2025.”

Mortgage and real estate professionals may take solace in the fact that homebuyer sentiment is considerably higher than it was a year ago. Survey data released Tuesday by Fannie Mae also showed that 42% of respondents expect mortgage rates to decline in the next 12 months, up from 31% one year ago.

“While respondents remain discouraged by the pandemic-era run-up in home prices and mortgage rates, the upward trend in home buying sentiment in 2024 may reflect a slow acclimatization to the generally less-affordable market conditions,” Fannie Mae chief economist Mark Palim remarked.

Redfin data released this week showed some positive signs for housing affordability. The brokerage reported that the share of income needed to buy the median-priced home fell slightly last year — the first time since the start of the COVID-19 pandemic that had happened. Still, a household earning the median income of $83,782 would need to spend nearly 42% of their paycheck to afford the median-priced home of $429,734, much higher than the typical share of 30% or less during the 2010s.

“For many Americans, buying a home remains more out of reach than ever and that’s unlikely to change anytime soon,” Redfin senior economist Elijah de la Campa said. “Even with inventory trending upwards, we still expect prices to continue rising in 2025 due to a lack of homes for sale — pushing more would-be homebuyers to rent instead.”

Mortgage Rates Drop Today—the Lowest It’s Been in 2 Months

Mortgage rates this week experienced the most dramatic decrease since mid-December, signaling that despite the skyrocketing inflation and concerns over the Trump administration’s tariff policy, the housing market is turning more buyer-friendly.

Home Prices Are Finally Cooling: Nearly 17% of Sellers Are Slashing Prices as More Homes Linger on the Market

Home Depot Sales Beat Expectations. What Does That Tell Us About The Housing Market?