Videos, Housing News

Housing Market Outlook for 2025

Hello everyone. Welcome back to the Mortgage Rundown. Today we are going to talk about what’s happening with interest rates.

Here we are almost a full month into 2025 and interest rates are still sitting on high side. Just when we thought rates were on their way down back in the summer, a fresh round of inflationary fears has pushed the 10yr up as high as 4.80% and now currently sits at 4.60%.

A big question is if now is a great buying opportunity for US Treasuries. Take a look at the graph on your screen, that is the 10yr real yield, which is the 10yr Treasury adjusted for inflation. As you can see the return today is near some of the highest levels of the past 20 years.

That tells us that there is still very material inflationary and uncertainty fears around the level of interest rates and the Federal Reserve’s path this year. In looking at the Fed Funds futures contracts, the market is pricing in only 1.5 rate reductions in 2025. A lot of this is centered around a recent drop in the unemployment rate when it looked like it was slowly increasing, along with very sticky inflation.

Not to mention the fact that we have a new administration recently elected that will dictate policy for the next couple of years and when you add all of that up, it’s understandable why the market is pricing in so much uncertainty. Hopefully by spring we will see more data on unemployment, inflation and clarity regarding future policy, which should naturally bring rates down somewhat. 

That’s it everyone from the capital markets desk this week. Thank you all for watching, and have a great day.