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.
Read more at Yahoo
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