A light week for labor and inflation news didn't stop rates from falling this week. In fact, it was one of the best weeks we've had in the bond market in 2025. Unfortunately, the stock market couldn't say the same, but mortgage rates and stock markets often move in opposite directions.

The average rate on a 30-year fixed rate conventional loan is 6.76% (from 6.83%) - but our clients are securing rates as low as 6.25%! Sign up for our weekly Friday rate texts to stay in the know on where rates are week by week! It's a must for anyone planning to buy or refinance in 2025! 

Housing Market Off To a Sluggish Start

Existing home sales nationwide fell slightly more than expected month-over-month to a seasonally adjusted annual rate of 4.08 million units. January is predictably one of the slowest months for the housing market as many Americans choose to pause their home search during the December holiday season.

What didn't pause, however, were home prices - which continued to climb - up 4.8% from January 2024 to $396,900, the 19th consecutive month of year-over-year price increases. It's a story that we continue to see unfold. Buyers sitting on the sideline waiting for rates to fall or home prices to fall are getting priced out. Why? Because we are still seeing low housing inventory. Nationwide home supply is up slightly year over year, but there's still only 3.5 months of supply (up from 3.0 months of supply in January 2024. We need way more supply if home prices are expected to stabilize/correct. Only 9 states are above pre-pandemic levels of housing supply, and 2 of those states are Texas and Florida! Areas in the northeast where regulations make it very difficult to build new supply are down as much as 57% from where they were pre-pandemic.

Austin, Texas is one of the markets where buyers hold A LOT of power.  Inventory in Austin is sitting at record highs (5.6 months today vs 4.7 months in Jan. 2024). New listings continue to be added at a record pace, but because Austin has already experienced a pricing correction, we're seeing home prices stabilize and even start to increase again. 

Economy Concerns

Friday's BIG stock market selloff was fueled largely by concerns over the economy. "We're seeing consumer sentiment, tariffs and corporate earnings having leap-frogged AI and technology as the primary drivers of market direction." says Greg Bassuk, CEO at AXS Investments in New York.

Consumer sentiment surprised to the downside last week, coming in at 64.7 (vs 67.5 expected). Consumers often spend more when they feel better about the financial outlook, and spend less in times of uncertainty. The Trump administration’s policy changes have heightened uncertainties about the economic outlook. Survey results suggested that  Democrats and independents believe the policies could reignite inflation.

This report comes at the heels of the week prior's bad retail sales data, which is what fuels the market's concern that the economy could be in for a bad year. When the economy goes through a rough patch, rates typically fall fast and hard to spur growth. It could be just what homebuyers need to get mortgage rates to a more comfortable position.

Rate Cut Predictions

The first cut in 2025 still looks like it's going to happen on June 18th!
 
February is set to close out on Friday with a critical PCE report release. Will inflation  reignite or will we see it continue on it's path towards the Fed's 2% goal?