The current state of the U.S. housing market should be thoughtfully examined in the context of some important economic events that occurred during the past few years.
Faced with surging inflation throughout 2022, the Federal Reserve responded by raising the federal funds rate in an effort to dampen consumer demand by making borrowing more expensive.
This proactive monetary strategy aimed to bring inflation down from its peak above 9% toward the Fed’s long-term goal of 2%. By the end of 2024, inflation had gradually declined, leading the Fed to shift gears and begin lowering interest rates.
Yet, despite expectations that mortgage rates would fall below 6% following these rate cuts, they unexpectedly rebounded toward 7%.
Continued economic instability, unpredictable market trends, and persistent inflationary pressures have kept mortgage rates elevated, contributing to a cooling housing market and discouraging activity among buyers and sellers alike.
On Sept. 17, the Fed implemented a 0.25 percentage point reduction in the federal funds rate, moving it from a range of 4.25%–4.5% to 4.0%–4.25%.
This was the first rate cut since December 2024, prompted by mounting concerns over weakening employment figures and stubborn inflation. Federal Reserve officials have signaled that additional rate reductions may be on the table later in 2025.
Considering this recent history, real estate brokerage and technology company Redfin warns Americans that one growing factor is driving a wedge between people wanting to sell their homes and those hoping to buy them.
Homebuyers continue to wait for mortgage rates to drop
Redfin warns that home sales are lagging, as many prospective buyers continue to hold off in hopes of lower mortgage rates — and uneasiness about the broader economic outlook.
“Redfin agents in much of the country say house hunters are waiting for rates to drop more before making a move,” wrote Dana Anderson, a Redfin data journalist.
“Mortgage rates, which have ticked up to 6.34% from last month’s low point, are still more than double pandemic-era lows, and rising home prices are exacerbating high costs,” she added. “The median sale price is up 2.1% year over year, the biggest increase in six months.”
The number of newly listed homes for sale in the U.S. climbed 2.3% compared to the same period last year during the four weeks ending Oct. 5 — the largest uptick in over three months, Redfin explains.
Related: Fannie Mae reveals mortgage rate, housing market forecasts
Some homeowners put their properties on the market in September, motivated by a drop in the average weekly mortgage rate to 6.26%, its lowest point in ten months.
However, buyer activity remains sluggish, according to Redfin. Pending home sales declined 1.3% year over year, marking the steepest drop in five months.
Additionally, the average home is now spending 48 days on the market before going under contract — seven days longer than a year ago and the slowest pace for any September since 2019.
Redfin reveals homebuying indicators
- The daily average 30-year fixed mortgage rate was 6.36 percent on Oct. 8, up from a 12-month low of 6.13 percent three weeks earlier and higher than 6.26 percent a year ago.
- The weekly average 30-year fixed mortgage rate reached 6.34 percent for the week ending Oct. 2, rising from 6.26 percent two weeks earlier and up from 6.12 percent year-over-year.
- Mortgage-purchase applications, seasonally adjusted, declined 1 percent from the previous week as of Oct. 3, but increased 14 percent compared to the same time last year.
- Redfin Homebuyer Demand Index fell about 1 percent from a month earlier as of the week ending Oct. 5, and dropped 13 percent year-over-year.
- Google searches for “homes for sale” rose 6 percent over the past month as of Oct. 6, and were up roughly 20 percent compared to last year.
- Touring activity increased 18 percent since the beginning of the year as of Oct. 3, whereas at the same time last year it had only risen 3 percent since the start of 2024.
An uncertain economic outlook impacts homebuying
Many potential homebuyers are hesitant to commit to a major purchase amid ongoing economic uncertainty, Redfin explains.
Concerns stemming from the government shutdown and disappointing employment data have left some Americans feeling uneasy about their financial stability.
More on homebuying:
- Zillow warns Americans on housing market, mortgage worry
- Berkshire Hathaway HomeServices explains housing market changes
- Fannie Mae forecasts mortgage rate shakeup
On the other hand, those who are ready to relocate and can manage current elevated home prices may benefit from the sluggish market, as it gives them greater leverage in negotiations.
“It’s a buyer’s market, with house hunters asking for price reductions, doing inspections, and requesting concessions,” said Jesse Landin, a San Antonio Redfin agent. “In terms of making offers, buyers are throwing spaghetti at the wall to see what sticks. Sellers who want to make it stick, will.”
“For example, one of my sellers, who needed to move, was getting desperate after her house had been on the market for over 100 days,” he continued. “She sold for $15,000 under asking price and included the furniture and outdoor amenities like the barbecue and fire pit.”
Redfin suggests condos for homebuyers
Buyers hoping to find a bargain might explore the condo market, where the number of sellers exceeds buyers by 72 percent nationwide — a wider imbalance than seen with other property types, Redfin clarified.
Another avenue Redfin recommends is newly built homes.
“Agents say some builders are offering mortgage-rate buydowns and other incentives in parts of the country with a lot of new homes,” Anderson wrote.
Related: Housing expert reveals crisis impacting mortgage rates
