Market Update: The latest economic data presents a mixed picture, with signs of a slowing economy that could impact the housing market in the coming months.
Economic Conditions: A Weaker Outlook?
Sentiment has declined, reflecting growing concerns about economic stability, while pending home sales fell 5% year-over-year, signaling continued weakness in buyer demand. Meanwhile, home prices are still rising at a 4.5% annual rate according to the Case-Shiller Index, though the pace of growth has slowed. Perhaps the most concerning development is the sharp drop in the Atlanta Fed’s GDPNow model, which now estimates first-quarter growth at -2.8%. While other forecasts remain positive, this downward revision raises questions about the broader economic outlook.
Interest Rates & Mortgage Market Trends
On the interest rate front, Treasury yields have been declining, with the 10-year Treasury approaching 4% after peaking at 4.79% in January. Mortgage rates have followed this trend but at a slower pace, underperforming Treasuries by about 0.10% over the past two weeks. The Federal Reserve’s next moves will be key—market expectations for rate cuts have increased, with a 40% chance of a cut in May and a 77% chance by June. Looking further ahead, the market currently anticipates three rate cuts within the next year. If the Fed follows through, this could lead to lower mortgage rates in the second half of 2025, potentially improving affordability for buyers.
Market Implications for Real Estate Agents
For real estate agents, the market remains a challenging but evolving landscape. While affordability is still a concern, declining mortgage rates could help bring buyers back into the market. Home prices continue to rise, though at a slower pace, which may create less competition for buyers compared to previous years. However, economic uncertainty means that buyer sentiment is cautious. Agents should be prepared to educate clients on financing options, interest rate trends, and market conditions to help them navigate the shifting landscape.
While headwinds remain, potential rate cuts later this year could create opportunities for buyers and sellers alike. Keeping an eye on upcoming economic reports, particularly inflation and employment data, will be key in understanding where the market is headed next.