Rates Stabilize as the Spring 2025 Buying Season Approaches

In the past five weeks, home borrowing costs have trended down, a sigh of relief to the housing sector with the spring buying season kicking off in a few weeks. Freddie Mac reports that in mid-January, the 30-year fixed rate was just above 7% and has since fallen to 6.85%. Not a big decline but moving in the right direction. Freddie Mac said, "This stability continues to bode well for potential buyers and sellers as we approach the spring homebuying season."

A few notable reasons why bond prices have risen and rates have declined were the January Fed minutes revealing that there could be a pause in Quantitative Tightening. Quantitative tightening (QT) refers to the process where central banks reduce the amount of money circulating in the economy by decreasing their balance sheets. It is essentially the opposite of quantitative easing (QE), where central banks increase the money supply to stimulate the economy.

In this case, the Federal Reserve would put a temporary or possible complete halt to selling off its balance sheet consisting of Mortgage-Backed and Treasury securities, thus decreasing the amount of bonds for sale on the market. Also, Treasury Secretary Bessent said they are not looking to sell much longer-term debt while QT remains in place. These factors have led to a rise in Mortgage Bond and Treasury prices, lower yields, and rates.

Another positive factor for the housing sector is that for the first time this decade, there was 3.7 months' worth of for-sale supply of homes sitting on the market in January. That's the most since February 2019 and up from 3.3 months a year ago.

Bottom line: Supply has been a thorn in the side for potential home buyers, and if that can be somewhat alleviated coupled with lower rates, it could bring some positive activity to the market.

Source: Mortgage Market Guide

Posted on March 8, 2025