The housing market continues to show positive signs despite economic question marks as a gradual improvement in mortgage rates encourages more people to buy new and existing homes.
The average rate for a 30-year, fixed-rate mortgage held steady at 6.65%, according to mortgage giant Freddie Mac. Although that figure has barely budged in the past three weeks, it looks much better to people looking to purchase a home than the 7% rate from mid-January.
“As rates continue to decline this spring — albeit at a slow pace — homebuyer demand is on the rise,” Bob Broeksmit, president and CEO of the Mortgage Bankers Association, said of the trend in a statement Thursday.
Both contracts to buy existing single-family homes and new ones rose in February. The MBA reported this week that applications to buy homes are also rising; notably, they jumped 6% among first-time buyers. Besides better rates, buyers are also enticed by a larger supply of listings. The inventory of existing homes for sale climbed 5.1% in February.
Market analysts expect rates to keep going down, somewhat. They should average 6.4% throughout 2025, according to a quarterly forecast by the National Association of Realtors. The group said rates won’t fall below 6% this year in part because of economic pressures.
“The current high national debt will prevent mortgage rates from falling drastically — and certainly not to the 4% to 5% range seen during President Trump’s first term,” said Lawrence Yun, the NAR’s chief economist.
Contracts to buy existing single-family homes were up 2% in February, the NAR reported, although they were down 3.6% from a year earlier. They rose 6.2% in the South, where the spring buying season gets a head start in colder parts of the country. Contracts fell 3% in the West and barely changed in the Northeast and Midwest.
Builders offer incentives to boost sluggish sales
Meanwhile, new home sales ascended 1.8% last month to a seasonally adjusted 676,000. That’s also 5.1% higher than the same period in 2024. Builders enticed people to buy in February with incentives like price cuts and mortgage rate buydowns.
Those offers aren’t necessarily enough to offset people’s lingering affordability concerns, however. Two prominent homebuilders, Lennar and KB Homes, reported sluggish demand recently, with prices down 1% at Lennar from a year ago and sales for KB dropping by 9%.
The median sale price of new homes sold in February was $414,500, down from $427,400 a month earlier. For existing homes on the market, the median sale price last month was $396,900, a 4.8% increase from January.