Housing Market & Mortgage Rate Predictions Post-Election
Now that the 2024 election has come to a close and the dust has settled, we can begin to look ahead into 2025 and contemplate what’s next for up-and-coming homebuyers. While it’s impossible to predict exactly what the coming months have in store, after more than 35 years in the industry, mortgage expert, Steve Smith, founder of Honor Mortgage Solutions, has a few ideas about how homebuyers can make the most of the coming months.
To begin with, it goes without saying that election years are often fraught with uncertainty, scarcity mindsets, and general fear for the future. Simply knowing the outcome of an election may help to lift the weight of uncertainty, regardless of the buyer's political affiliation!
One crucial issue facing homebuyers for the last few years has been the shortage of homes on the market. This is due to a multitude of factors, amongst those being a lack of certainty around the future of the housing market. This, in turn, causes homeowners to be more resistant to selling their homes, upgrading to larger spaces, or relinquishing those low interest rates brought on in 2020. Steve is optimistic that more sellers will put their homes on the market this year, thus creating more inventory for first-time buyers.
Furthermore, Steve expands on his thoughts from the previous blog, Why 2025 Is the Perfect Time to Buy a Home.
According to Steve, we may look to see rates stabilizing, in 2025. Many people thought that 2024 was set to be the “comeback year” in which prices stabilized and everyone was once more, on the path to moving into their dream home at a reasonably low rate. This didn’t happen. While we are unlikely to see the historic lows of 2020 and 2021 anytime in the near future, rates are expected to stabilize and be fairly favorable (especially when compared to previous decades.) According to Steve, this stability is a good thing, providing buyers with the opportunity to lock in a rate that is both affordable AND predictable, which ensures they can better plan and budget for their financial futures. Expected rates will likely fluctuate between 5.5 - 7% through the year, an entirely reasonable and realistic market-driven rate.
There are two other bright spots looming in 2025…
1. There are going to be more accessible loan options available than ever before.
With home prices on the rise, we are seeing more government programs and lenders offering additional assistance for first-time home buyers in the coming year. Examples include programs with lower down payment requirements, down payment grants, and tax credits, all made more accessible than ever before.
2. Conforming loan limits are going up! Buyers can now borrow up to $802,650 for a home with just 3% down. (This is up significantly from the previous loan limit of $766, 500. Overall this is great news for buyers considering a conforming loan. For those unfamiliar with “conforming loans” this simply refers to a mortgage that meets specific criteria set by the Federal Housing Finance Agency (FHFA) and is eligible to be purchased by government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac. The key requirements for a conforming loan include loan amount limits, borrower qualifications, and property standards. These criteria are designed to ensure that the loan is low-risk for lenders and investors.
Future homebuyers may consider a conforming loan for the following benefits:
Lower Downpayment Requirements. Many conforming loans, such as those through Fannie Mae or Freddie Mac programs, allow down payments as low as 3% for qualified borrowers.
More flexible terms. Conforming loans come with various term lengths (15-year, 30-year), offering borrowers flexibility in choosing a repayment schedule that fits their financial goals. No longer are we stuck exclusively with 30-year mortgage options (more on this topic coming soon!). Rather, today’s buyers have greater flexibility in choosing the loan that best suits their financial goals.
More accessible refinancing options. Conforming loans make refinancing more accessible, particularly through programs like the Home Affordable Refinance Program (HARP) or others offered by Fannie Mae and Freddie Mac. This means, that even if you choose to buy a home with a mortgage rate that is less than ideal, you can rest assured knowing that you have the option to refinance down the road.
There is plenty to look forward to as we navigate a post-election world. If you are thinking about purchasing a home or refinancing this year, Steve is here to help. To learn more about your options and take advantage of our free mortgage calculator, contact Steve today.