Climbing home prices and borrowing costs suggest a grim outlook for many buyers – but experts suggest some green shoots are showing
Home sales across the US may be projected to tick slightly upwards by the end of the year, but high mortgage rates are continuing to push plenty of would-be buyers to the sidelines.
While conventional purchase volume was 2% higher last week than the same time last year, according to the Mortgage Bankers Association (MBA), the average 30-year fixed mortgage rate is still hovering around 7%.
That marks a “key psychological level,” MBA’s senior vice president and chief economist Mike Fratantoni said, and one that will probably continue to weigh down on both refinance and purchase activity in the weeks ahead.
Rates have been on a steady upward climb since the beginning of 2022, sliding slightly last year but bouncing back at the end of 2024, and that trend – coupled with home prices that remain prohibitive for many buyers – has contributed to a sharp affordability crisis across the country.
“I think the combination of higher rates and how much prices have gone up is what makes it a little bit difficult for people,” Dan Sogorka (pictured top), general manager at Rocket Pro, told Mortgage Professional America. “That’s why you’re seeing the average first-time homebuyer age is at an all-time high, and you’re seeing people stay in their houses longer.”
That so-called “lock-in effect” is keeping people in the mortgages they took out during the COVID-19 pandemic, with far lower borrowing costs than current rates, even if they might otherwise have sought to move.
But Sogorka said he was hopeful circumstances on the affordability front would improve in the months ahead, with mortgage rates projected to eventually dip lower and a renewed focus on improving the housing outlook in Washington.
“Hopefully as we head into 2025 and there’s a new administration and a lot of people getting involved in housing policy, there’ll be a lot of people who want to work on affordability – and obviously we’re doing our part [at Rocket] as well,” he said.
“When you look at the market right now it’s pretty locked up in terms of where inventory is, where rates are, and where home affordability is. So that’s our mission: How do we help people in these scenarios either by giving them the right tools, educating them, giving them the right products, and unique things we can do in terms of buydowns?”
Mike Del Preto, Chicago-based mortgage broker, shares his insights on the ongoing "lock-in effect" as mortgage rates surpass 7%, influencing homeowners to stay put to preserve ultra-low rates.https://t.co/qApNBJwJGY
— Mortgage Professional America Magazine (@MPAMagazineUS) January 17, 2025
What’s in store for the US housing and mortgage markets in 2025?
While there remains plenty of uncertainty in the US economic outlook as the new administration begins to enact its policy slate, the National Association of Realtors (NAR) has sounded a positive note on prospects for the housing market this year, forecasting that a robust jobs market will help spur homebuying.
Lawrence Yun, the association’s chief economist, said in recent months that “maybe the worst is over” for the national market – and projected that 2025 would see existing home sales jump by 9% compared with the same time last year, with new home sales expected to increase by 11%.
That rebound is expected to continue next year: Yun said existing-home sales would likely be up 13% in 2026, and new home sales by 8%.
But market watchers are also taking a cautious approach to the home price outlook for the year ahead, with the stock market currently pricing significant discounts into housing portfolios, according to the Wall Street Journal.
Rocket announces rebrands for 2025
Sogorka was speaking with MPA shortly after the announcement that Rocket had opted to unify multiple services under the “Rocket” brand, with national title producer Amrock undergoing a name change to Rocket Close, Amrock Title Insurance Company relaunching as Rocket Title Insurance Company, and Rocket Pro TPO becoming Rocket Pro.
He said the organization remains focused on “how we can help homeowners and aspiring homeowners regardless of the conditions in the market,” and highlighted its longer-term approach to the housing question, “also understanding that people have challenges in the here and now.”
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