Mortgage Rates Dip, but Not Enough To Ease Consumer Concerns

Homebuyers ready to move this spring might have more incentive to lock in a rate. Mortgage rates eased for a sixth week in a row to 6.76%. That’s the lowest level of 2025, but it’s still over half a percentage point above the September low.

It is still very early in 2025, but the housing market is now showing the slowdown we anticipated from the late 2024 spike in mortgage rates. The relief in mortgage rates we’re seeing now is expected to bring some buyers back to the market, but home sales will likely not register this pickup until the late spring or early summer.

January data on personal income and spending showed upticks in revenue and the savings rate while the Fed’s preferred inflation gauge steadied. Combined with consumer confidence, which showed a third monthly drop in February, data suggests that consumers are growing more cautious over concerns about the outlook.

In housing news, Case-Shiller showed that sales prices continued to gain between 4% and 5% to the end of 2024, even though home list prices were flat to lower in this period. Strength was seen in New York City, Chicago, and Boston, while prices fell in Tampa, FL.

A similar regional trend continued into February, with asking prices showing the most strength in the Northeast and Midwest. The biggest surprise from the Realtor.com® February Housing Trends report, however, was an uptick in price reductions as a share of active listings.

We not only saw the highest share of February reductions going back to 2017, we also saw a seasonally unusual increase in price reductions from January. Inventory growth continued, but newly listed homes increased by only half as much as in January, and weekly data showed softening new listings growth as the month progressed.

Among transaction indicators, new-home sales declined in January and pending home sales also fell. Both new-home sales and pending home sales are counted when contracts are signed and suggest that home sales or closings will slow in the next month or two.

While sales slowed across the board, new-construction homes, which have comprised a larger than usual share of inventory and sales, outperformed. New-home sales registered on par with a pace near what was typical in 2022 and 2023, while the pending home sales index hit its lowest level since counting began in 2001—suggesting this trend will continue.

One last note, many are curious about the housing market effects of changes in the federal workforce. We’ve not yet seen an impact, but given the recency of the changes, I wouldn’t expect to see anything in the data just yet.

In the Realtor.com February Housing Trends report, we ranked markets by the share of federal employees among all payroll jobs to have a lens through which to watch for changes in upcoming months.

We’re keeping our eyes on the following markets:

• Washington-Arlington-Alexandria, DC-VA, MD, WVA

• Virginia Beach-Chesapeake-Norfolk, VA, NC

• Oklahoma City, OK

• Baltimore-Columbia-Towson, MD

• San Diego-Chula Vista-Carlsbad, CA

• San Antonio-New Braunfels, TX