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llustration by Lanette Behiry / Real Estate News
Economists warn that rising inflation, a volatile labor market and an overall uncertain U.S. economy could lift interest rates in the coming weeks and months.
**Housing market trends**
The seasonal slowdown is now compounded by a weakening supply‑demand balance. New U.S. home listings fell 1.7 % in the four‑week period ending Dec. 7, the steepest year‑over‑year drop in more than two years, according to Redfin. Pending sales slipped 4.1 %, the largest decline in ten months, and the median days on market rose to 51, up six days from a year earlier. “Sellers are holding off because the market is flat and because buyers are waiting to see how rates, the stock market and tariffs will evolve next year,” said San Francisco Redfin Premier agent Josh Felder. He added that many homeowners plan to list in 2026 once the economic picture clarifies.
**Mortgage rates**
After the Federal Reserve’s anticipated Dec. 10 rate cut, 30‑year fixed‑rate mortgages hovered around 6.22 % as of Dec. 11, a modest rise from 6.19 % the week before. Mortgage News Daily noted a slight dip following the Fed’s decision. Bright MLS chief economist Lisa Sturtevant cautions that rates may edge higher in late 2025 as markets digest the Fed’s mixed signals, and that a potential inflation rebound in 2026 could push rates further up. Realtor.com’s senior economist Anthony Smith believes that if rates stay near current levels in 2026, affordability will improve modestly, helping to temper but not halt home‑price growth.
**Refinancing activity**
Despite the slowdown in new sales, refinance applications surged 14 % seasonally adjusted in the week ending Dec. 5, according to the Mortgage Bankers Association (MBA). Conventional purchase applications dipped slightly, but FHA purchase applications rose 5 % as buyers seek lower down‑payment options.
**Labor market uncertainty**
The federal shutdown earlier this fall left several key reports missing, leaving the national economy in a fog—especially the job market. Initial jobless claims jumped 44,000 to 236,000 for the week ending Dec. 6, the largest increase since March 2020, yet a week earlier they had hit a three‑year low. This volatility, coupled with the uncertain impact of tariffs on inflation, prompted the Fed to hint at pausing further short‑term rate cuts in early 2026. The central bank also indicated it will observe the effects of three consecutive cuts before altering policy again.
In the final weeks of 2025, both buyers and sellers are adopting a cautious stance, mirroring the Federal Reserve’s measured approach to monetary policy. The market’s seasonal dip, combined with broader economic ambiguity, suggests a period of waiting and watching as the U.S. economy navigates inflationary pressures, labor market swings, and the potential for future rate adjustments.
