After two bumpy years of around 4 million units in existing home sales, the two big questions for 2025 are: 1) will mortgage rates finally follow the Fed Funds Rate lower?, and 2) will they drop enough to get demand (and supply) back to normal?

What will 2025 hold for the housing market? Most forecasters are calling for a modest increase in transaction volumes and limited price growth (2–4%), but it all hinges on trends in mortgage rates.

October existing home sales increased on a year-over-year basis for the first time in more than 3 years. That’s great news, but it’s hard to say if that’s just a ‘blip’ (mortgage rates have risen sharply since then) or a real bottoming in transaction volumes.

The inventory of homes for sale is up 28% year-over-year (more choices for buyers!), but 30-yr mortgage rates are back near 7% (affordability issues for buyers).

Talking Points took a break last week, so we’ve got a lot of news to catch you up on: contradictory data releases, the Fed meeting and more!

It’s been a very cruel October for would-be buyers, with average 30-yr mortgage rates spiking on concerns about job market strength, stubborn inflation, and fast-rising US debt levels. Looking on the bright side, however, inventory levels continue to rise and competition levels are falling.

The Fed cut rates by 50 basis points on September 18. Since then, average 30-year mortgage rates have RISEN by 50 basis points. Why? Because September jobs growth was a lot stronger, and September inflation (CPI) was a bit hotter than expected.

It’s been a tough week for homebuyers, with stronger September jobs growth sending bond prices lower and mortgage rates higher.

Mortgage rates have drifted higher since the Fed rate cut, as job openings (JOLTs) and job growth (ADP) came out stronger than expected, and Fed Chairman Jerome Powell talked up the economy’s strength.

With mortgage rates down sharply in the last 5 months, the volume of refinancing is already up big. But we have yet to see those lower rates translate to increased homebuyer demand.

An aggressive start to the Fed’s new easing cycle, with a 50 basis points rate cut announced on Wednesday.

The big story this week is 30-yr mortgage rates, which are already in the low sixes as the market anticipates multiple Fed rate cuts (and perhaps a recession) ahead.