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New 2025 Interest Rate Projections: Time to Buy or Sell? - 1/17/25

Writer's picture: Alex PreziosiAlex Preziosi

Updated: Jan 27




The recent employment data has sent ripples through the financial markets, notably influencing mortgage rate projections for 2025. For individuals contemplating buying or selling a home, understanding these dynamics is crucial.


Key Insights from the Jobs Report


The U.S. economy added 256,000 jobs in December, surpassing expectations and signaling robust economic health. While a strong labor market is generally positive, it can have complex implications for interest rates and, by extension, mortgage rates.


Implications for Mortgage Rates


Mortgage rates are closely tied to economic indicators, with employment data being a significant factor. The unexpected job growth has led to several developments:


  • Increased Treasury Yields: Following the jobs report, yields on long-term U.S. government debt, such as the 10-year and 30-year Treasury bonds, have risen. These yields heavily influence mortgage rates, and their increase suggests that borrowing costs, including mortgages, are likely to climb. MarketWatch


  • Federal Reserve's Stance: The strong employment figures have reduced market expectations for Federal Reserve rate cuts in 2025. Previously, multiple cuts were anticipated, but now predictions have scaled back to only 27 basis points for the year. This shift indicates that the Fed may maintain higher interest rates longer than initially expected, contributing to elevated mortgage rates. Reuters


  • Market Volatility: The combination of strong economic data and the potential for sustained higher interest rates has led to increased market volatility. This environment can create uncertainty for both buyers and sellers in the housing market. The Scottish Sun


New Projections for 2025


Given these factors, several forecasts have been adjusted:


  • Mortgage Rates: Analysts now expect mortgage rates to remain above 6% throughout 2025, more likely to exceed 7%. For instance, Fannie Mae forecasts rates ending 2025 at around 6.3% and remaining above 6% through 2026. Fannie Mae


  • Housing Market Activity: Elevated mortgage rates are anticipated to keep existing home sales near historic lows, with only a modest 4% increase projected for 2025 from a nearly 30-year low in 2024. This subdued activity is attributed to affordability challenges and the so-called "lock-in effect," where current homeowners are hesitant to sell and lose their existing low mortgage rates. Fannie Mae


What it Could Mean for Buyers & Sellers in NJ


For potential homebuyers, the prospect of rising mortgage rates means that waiting could lead to higher borrowing costs. Securing a mortgage sooner rather than later might result in more favorable terms and lower monthly payments. With homes sales still projected to remain low, limited inventory throughout NJ could keep buyer demand strong relative to supply.


Sellers, listing a property before rates climb further could attract more buyers and facilitate a quicker sale. In addition, listing while inventory is low allows for your home to stand out from the few other properties on market, and further drive demand.


Strategic Considerations


  • For Buyers: Engage with mortgage lenders to explore rate lock options, which can secure current rates for a set period.


  • For Sellers: Enhance your property's appeal through strategic improvements. Pricing competitively can also attract serious buyers. Take advantage of the current low inventory environment.


Conclusion


The latest jobs report underscores the dynamic nature of the economy and its direct impact on mortgage rates. Both buyers and sellers should act promptly and strategically to navigate the evolving housing market landscape in 2025. Consulting with real estate professionals and financial advisors can provide personalized guidance tailored to individual circumstances.


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