February 2025 Market Update
As we kick off February, several important economic trends are shaping the outlook for the housing and mortgage markets. While there are no drastic shifts at the moment, evolving fiscal policies, inflation pressures, and interest rate changes are all impacting buyer and seller decisions. Let’s break down what’s happening and how it affects you and your clients.
Mortgage Rates: Slight Relief, but Still High
After hitting a peak of 7.05% on January 14th, mortgage rates have come down slightly—by about 0.25%. However, they are still around 0.3% higher than the levels seen in early December. This volatility is largely due to uncertainty surrounding fiscal policies, such as taxes and government spending, as well as global geopolitical risks.
For now, there’s no clear trend in either direction. The market is essentially in a wait-and-see mode, which can leave both buyers and sellers feeling cautious. Understanding this context will help you better guide your clients through the current landscape.
Economic Growth is Slowing
The U.S. economy showed weaker-than-expected growth in the last quarter of 2024. GDP rose by 2.3%, falling short of the 2.7% forecast and significantly below Q3’s 3.1% growth. This came as a surprise to many, especially since election-year spending and preemptive purchases related to tariff concerns were expected to boost economic activity.
This slowdown is sending mixed signals to the market. On one hand, economic deceleration could ease inflationary pressures and eventually lead to lower rates. On the other hand, continued uncertainty may prevent rates from declining quickly in the short term.
Treasury Yields and Inflation: No Clear Direction Yet
The U.S. 10-year Treasury yield—a key indicator that influences long-term mortgage rates—remains near the 5% mark, having bounced between 3.7% and 5.0% over the past 18 months. While there have been periods of sharp rallies and sell-offs, there hasn’t been a sustained trend in either direction.
At the same time, inflation, as measured by the Core PCE, was 2.8% in December, indicating that progress toward the Federal Reserve’s 2% target remains slow. This has kept mortgage rates under upward pressure, though they haven’t spiked further for now.