Rates fell by a quarter of a percent. (I Stock )
particle for direct object The Federal Reserve recently cut interest rates Once again this year, at its recent meeting, the Federal Reserve decided to cut interest rates by a quarter percentage point to a range of 4.25% to 4.5%. This move was largely expected by economists.
After other interest rate cuts, the Federal Reserve pointed to indicators of a growing economy and a growing labor market. It's the third time interest rates have been cut this year, but economists don't expect a rate cut in 2025.
“The median now expects there to be only two cuts in 2025, with the long-term federal budget target at 3 percent,” MBA senior vice president and chief economist Mike Fratantoni said in a statement. The MBA predicts that the federal funds rate will drop to just 3.75 percent this cycle.
The unemployment rate is also low and inflation is making slow but steady progress toward the committee's 2 percent target, both factors that created bottlenecks in the eventual decision to cut rates.
Fratantoni said: While the unemployment rate increased last year and inflation decreased, inflation has decreased in recent months. It was not surprising to see dissent at the meeting, with one member voting to keep rates unchanged.
With the latest rate cut, the Fed is hoping to get inflation closer to growth and lower the unemployment rate.
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Inflation has seen the lowest annual increase since 2021
Home sales are likely to increase in 2025
The housing market has faced a rollercoaster of a year, but certain aspects of home sales are expected to increase in 2025. Real estate Experts predict that mortgage rates will decreasegiving potential buyers who have been priced out of the market in recent years more wiggle room.
Many measures of the housing market have moved closer to historical norms and are showing signs of market recovery in the new year. Listings are still lower than before the pandemic, but significantly higher than in March, when there was a 25 percent deficit. According to Zillow.
However, buyers shouldn't expect a completely smooth road when shopping in 2025. For many, 2025 looks eerily similar to the volatile market of 2024.
“There is a strong sense of déjà vu for 2025,” said Skylar Olsen, chief economist at Zillow. “Once again, we expect mortgage rates to gradually improve and opportunities for buyers to follow, but be prepared for many bumps along the way.” ” .
Buyers looking to move in the slower winter months have an advantage. Sellers who have been waiting for rate cuts may be looking to unload their homes while interest rates are falling.
“People buying this winter have a lot of time to choose and are in a pretty strong negotiating position,” Olsen said.
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The U.S. added 818,000 jobs this year, fewer than originally estimated
Mortgage rates and house prices are expected to fluctuate in the coming year
More listings may be on the horizon, but buyers shouldn't expect low mortgage rates anytime soon. Prices have not dropped yet. Prices are expected to grow by 3.7%. Realtor.com recently reported.
Mortgage rates are also expected to remain in the 6 percent range, with fluctuations throughout the year, roughly the same as in 2024. Given these small improvements, single-family home inventories are expected to grow by roughly 14 percent.
Vendors in some highly desirable areas will continue to hold sway in 2025. Inventory is improving, but still limited compared to previous years. This gives sellers the upper hand when negotiating prices.
It's hard to predict how the newest presidential administration will play into the housing market recovery, but a “Trump bump,” as Realtor.com calls it, is likely.
Realtor.com Chief Economist: “While President-elect Trump can quickly work with his administration to implement some regulatory changes, other policies that affect housing, such as tax changes and broad deregulation, will require cooperation. It has other branches and levels of government.” Daniel Hill said.
“The size and direction of Trump's blow will depend on when the campaign proposals finally turn into policy,” Hill said. Currently, we expect a gradual improvement in housing market dynamics with broader economic factors.
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