T
he real estate market is slowly adjusting to higher mortgage rates, but experts warn that if homeowners hold onto their low rates, inventory could decline and prices will continue to rise in 2025. According to Freddie Mac's survey, 30-year fixed-rate mortgages averaged 6.85% this week, up from 6.61% a year ago. Despite the increase, buyers and sellers are gradually returning to the market, driven by a strong labor market and more homes for sale.

    New and existing home sales in November indicate that the market is adapting to higher rates. New home sales rose 5.9% to a seasonally adjusted annual rate of 664,000, while existing home sales increased 6.1% year-over-year to 4.15 million. However, if homeowners continue to hold onto their low rates, inventory will likely decline and prices will remain elevated.

    Experts note that the market is shifting towards a "new normal" of higher mortgage rates. Mark Fleming, chief economist at First American, said that buyers and sellers are gradually returning to the market, supported by a healthy labor market and more homes for sale. However, Redfin Senior Economist Sheharyar Bokhari warned that if homeowners continue to hold onto their low rates, inventory will tick back down and prices will keep rising in 2025.

    The daily average mortgage rate continues to rise, with Mortgage News Daily reporting an average of 7.16% for December 26. Experts attribute the increase to a forecast of fewer interest rate cuts in 2025 and bonds trending towards longer-term rates moving at a faster pace than short-term rates.