Mortgage Rate Outlook: A More Buyer-Friendly Market
Two years ago, real estate was a sprint—record-low rates, surging demand, and bidding wars. Homes closed in days, often with inspections waived; buyers rushed or risked being priced out.
Now the script has flipped. With higher rates, demand has cooled and the market has found balance. Joel Berner, Senior Economist at Realtor.com, calls today a “buyer-friendly balanced market.”
“[We see] a lot of sellers with some unrealistic expectations who list their homes maybe at prices they would have gotten in 2022, but it’s not 2022 anymore. So they have to do price reductions and negotiate with buyers.”
It’s not a classic buyer’s market, but buyers have time for due diligence and leverage for repairs, credits, or closing costs. Instead of racing, we can align budget and long-term goals to structure the right path to ownership.
For sellers, homes no longer “fly off the shelf.” Overpriced or fixer-upper listings sit. Homes need realistic pricing, curb appeal, and seller flexibility.
What about rates ahead? Over the next 6-12 months, mortgage rates are expected to slide modestly lower -- but with significant caveats. The key drivers are the Fed's handling of short-term rates and how inflation and economic growth evolve. Although the Fed has begun trimming its policy rate, future cuts are expected to be measured and data-dependent, rather than aggressive. Bottom line, the Fed is in no hurry to get on the wrong side of either inflation or economic growth.
Long-term rates, like mortgage rates, are not mechanically tied to the Fed rate. They reflect market expectations for inflation and growth, and they incorporate a term premium (extra yield for bearing interest rate risk over the long term).
Even as the Fed cuts short term rates, the term premium could remain elevated if investors worry about the impact of inflation or economic growth. Many forecasters expect average 30-year fixed rates to end 2025 in the low 6's, and gradually drift down as we go into 2026.
While the slow slide in rates might tend to test one's patience, there's a silver lining: a large drop in rates would usher a flood of sidelined buyers into the market (and guess where home prices would then go). So the good news: for well-qualified buyers is that reduced competition, improving selection, and steady values have created one of the most favorable windows in years.
If you’ve been waiting, now is the time to take the wheel. Let’s review your numbers, explore purchase or refinance options, and chart the course toward your long-term real estate goals.
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