Rates have remained stubborn – and borrowers shouldn't pin their hopes on a big drop
Elevated interest rates and rising home prices have caused many potential homebuyers to pause looking for a new home. And while home price increases are slowing, and lower rates are forecasted, one broker reminds customers not to expect either to plummet in the future.
Fannie Mae lowered its interest rate forecast on Wednesday. It expects rates to end 2025 at 6.1% and 2026 at 5.8%. Meanwhile, Redfin reported this week that home prices declined by 0.1% in April, marking the first drop since 2022.
Stacey Melton (pictured top), vice president at Reasy Financial, cautions buyers not to expect a significant drop in either rates or home prices anytime soon.
“If I hear one more person say they're waiting for the market to crash, I'm going to lose it,” Melton told Mortgage Professional America. “If I had $1 for every person who said that in the last two years, I'd already be retired, living on some island somewhere. Because that's how often you hear it, and obviously that's not what's going to happen right now.”
Melton notes that one of the biggest reasons there won’t be a crash now, like there was in 2008, is that mortgages on the books are much more solid.
“We used to have a joke that in 2005 and 2006, if you had a good credit score and a pulse, you could get a mortgage,” she said. “It was like Oprah: ‘You get a mortgage, and you get a mortgage.’ And then the market crashed. Now we’re back to the way things should have been, with full qualifications.
“Yeah, it’s way harder to buy a house than it was in 2005 and 2006. But we’ve prepared the mortgage economy to be stabilized, so we’re not going to go through that crash like we did before.”
Inventory increasing in major cities
Redfin reported Monday that the number of active housing listings increased by 1.2% from the previous month to its highest level since March 2020. Melton has seen that take shape in her primary market of Phoenix, Arizona.
“In my primary market, which is Phoenix, a balanced market is 38,000 in inventory,” Melton noted. “We were down to 6,000 or 7,000 for a very, very long time. Rates were 2%, and people were falling out of the trees trying to buy homes. I’d tell them, ‘Great. If you can find one, I can do your mortgage. Your mortgage is going to be easy. The hardest part is finding the house.
“It used to be that the hardest part was the mortgage, and the easy part was finding the house. So that was a challenge during those times. And now we're back up to about 20,000, so we're getting more into a balanced, stable market.”
Melton categorizes current homebuyers into three categories: those ready to buy regardless of the rate, those who could buy but won’t until rates drop, and those who need to buy but struggle to qualify.
“The first group is ready to buy right now,” she said. “They’re qualified, they’re ready to pull the trigger, and they don’t care about interest rates. Most of our first-time homebuyers don’t know what it’s like to have a 3% rate. They just want to know what the payment is. The second group says, ‘I’m not buying a house at a 6% interest rate. I’m waiting for rates to go down.’”
It’s the third group that Melton really feels for, as they’re the group most struggling with the current affordability challenges.
“They’re the ones that pull my heart strings the most,” she said. “They don’t own a home. Sometimes they’re single parents or newlyweds. They can’t qualify like they want to, but they can’t wait for rates to come down. And then I explain to them what’s going to happen when rates come down, that they’re going to be competing with other offers then.”
‘You’ve got to strike while you can’
Market volatility, partly caused by increased tariffs, has helped keep interest rates elevated. While interest rates are forecasted to drop later in the year, no one is certain when that will happen. The Federal Reserve has backed off rate cut talks as inflation becomes a greater concern.
It’s why brokers like Melton are encouraging customers to act, as long as it makes sense for their current situation, because waiting might only make things more expensive.
“You’ve got to strike while you can,” Melton said. “People ask me all the time when’s a good time to buy a house. When it works for you. Don’t worry about what anybody else is doing. Don’t worry about the market or interest rates. Does it make sense for you and your family to buy a home right now? If so, get into a new home before you miss the boat.”
Kevin Kenerson of Lending Hand Mortgage stresses that waiting to buy means paying more later. He shares how assistance programs and credit support can help buyers navigate today’s tougher market.https://t.co/dNmmi1phZV
— Mortgage Professional America Magazine (@MPAMagazineUS) May 20, 2025
She reminds borrowers that the low rates of the post-pandemic world were an anomaly, and the current rates, while slightly elevated, are closer to where they should normally be.
“Some people are living on these things that happened once,” she said. “Rates had never been in the two ever in the history of mortgages. So, they’re waiting for these things to happen that are just never going to happen. And that’s why it takes a professional who’s been doing this for a long time to educate them.
“I tell them, ‘You’re waiting on something that’s not going to happen, and you’re going to end up being priced out, and you’re not going to own a home.’ I say it much nicer, but at the end of the day, people aren’t coming to me to give them rainbows and unicorns. They come to me to get the data and educate them on the process of why it’s so important to purchase a home right now.”
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