Economic reports paint a fairly rosy picture of the housing market. And that might surprise many. Because a lot of home buyers and sellers are not having an easy time. So, what's happening?
Numerous Reports Paint Optimistic Scene
On Tuesday, the Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac, published its home price report for the first quarter of this year. It found that "U.S. house prices rose 4.0 percent between the first quarter of 2024 and the first quarter of 2025."
On the same day, the S&P CoreLogic Case-Shiller home price index emerged. And it "recorded a 3.4% annual gain in March 2025."
The April consumer price index (CPI), published May 13, showed consumer inflation running at 2.3% year-over-year. So, homeowners made a modest real-terms profit, meaning they were still making money from their homes after allowing for inflation.
Meanwhile, on May 23, MarketWatch said, "U.S. new home sales rose 10.9% to a seasonally-adjusted annual rate of 743,000 in April from a revised 670,000 in the prior month, the government reported Friday. This is the highest level of sales since February 2022."
You may not describe this as a booming housing market, but it's far from a bad one.
So, Why Don't Things Feel Better?
Mortgage rates have been a serious downer recently. A year ago, pretty much everyone expected them to be gently but consistently falling by now.
But they've remained stubbornly high. On May 22, Freddie Mac reported the average rate for a 30-year, fixed-rate mortgage (FRM) was 6.86% over the seven days leading up to that date. That was within touching distance of 7.04%, which is that rate's highest point over the last 52 weeks.
Meanwhile, those of us who report rates daily rather than weekly, including the publication you're reading, Mortgage Research Network, and Mortgage News Daily, reckon they peaked above 7% on some recent days, though they have begun to moderate now. We put their level at 6.9% yesterday evening.
High mortgage rates scare two groups in particular, keeping them out of the housing market unless their need is pressing:
- First-time homebuyers who battle to afford to purchase a home when rates are high.
- Long-term homeowners whose existing mortgage rates are way lower than today's.
Will Things Get Better or Worse?
Mortgage rates could go either way. Investors, consumers and businesses currently fear three things, two of which may or may not occur: an economic downturn, a spike in inflation, and the uncertainty that comes with unpredictable and rapidly evolving policy.
Specifically, they worry about high tariffs and growing government deficits and debts.
It's unlikely we'll see sharp and sustained decreases in mortgage rates in any scenario. When the economy booms, mortgage rates tend to rise. An economic downturn could deliver lower rates. But not with high inflation and ballooning government debt. Those almost always send all interest rates higher. Consumers can hope for a Goldilocks scenario, where rates come down without an economic downturn.
