Key Themes:

Rising Mortgage Rates and Market Uncertainty: Mortgage rates have surged above 7%, defying expectations and impacting affordability. This has caused some buyers to delay purchases, leading to fewer sales despite an increase in new listings. Experts are divided on the direction of rates in 2025, with some predicting moderation while others anticipate further increases.

Shifting Inventory Dynamics: After years of tight inventory, more sellers are entering the market. This is likely driven by rising mortgage rates, homeowners no longer feeling the “lock-in effect”, and a desire to capitalize on still-high home values. The increase in listings is contributing to a slowdown in home price growth, with some experts predicting a possible decline in prices if the trend continues.

Challenges and Opportunities for the Mortgage Industry: The rise of the gig economy requires lenders to adapt to non-traditional borrowers. Tech giants are exploring the mortgage space, potentially disrupting traditional lending models. Meanwhile, the possibility of space-based mortgages emerges as private companies venture into off-planet settlements.

Impact of the Los Angeles Wildfires: The recent wildfires in Los Angeles have devastated communities and will have a lasting impact on the housing market. Rebuilding efforts are expected, but experts are calling for a focus on resilience and sustainability in future development.

Political Landscape: The appointment of a new HUD Secretary under the returning Trump administration brings both optimism and concern. The industry awaits policy changes and their potential impact on affordable housing, lending practices, and the overall housing market.

Important Data Points:

Mortgage Rates:The 30-year fixed-rate mortgage averaged 7.04% the week of January 16th, 2025, marking the fifth consecutive weekly increase and the first time rates have crossed the 7% mark since May 2024. (Freddie Mac, Realtor.com)

A year ago, 30-year rates averaged 6.6%. (Freddie Mac)

The average rate on a 30-year fixed-rate mortgage hit 6.93% during the second week of January, the highest it has been since early July 2024. (Freddie Mac)

Despite rate cuts by the Federal Reserve in late 2024, mortgage rates continued to climb due to a strong economy and concerns about inflation. (Freddie Mac, Housing Market Decoded)

Housing Starts and Inventory:Total inventory of homes for sale dipped to 624,000 this week, surprising analysts. (Altos Research)

There are 24% more homes on the market than a year ago, but still 19% fewer than in January 2018. (Altos Research)

There were 45,000 new listings for single-family homes across the country this week, a 12% increase year-over-year. (Altos Research)

Single-family housing starts increased to 1,050,000 (SAAR) in December, up 3.3% from November but 2.6% lower than in December 2023. (Zillow Research)

Home Prices and Sales:There were just under 41,000 newly pending contracts for single-family homes this week, a 3% decrease year-over-year. This divergence between rising listings and falling sales volume is a significant shift. (Altos Research)

Home price growth accelerated in the fourth quarter of 2024, following two quarters of deceleration. (Fannie Mae)

The median price for homes entering into contract this week was just under $375,000, barely above prices paid a year ago. (Altos Research)

The median price of all homes currently in contract is $395,000, just under 4% higher than a year ago. (Altos Research)

Quotes:

"The underlying strength of the economy is contributing to this increase in rates." - Sam Khater, Chief Economist at Freddie Mac

"Year-over-year home price growth accelerated in the fourth quarter, following back-to-back quarters of deceleration.” - Mark Palim, Senior Vice President and Chief Economist at Fannie Mae

"Inventories of existing homes for sale have improved from a year ago but remain historically low, due largely to the so-called ‘lock-in effect.’" - Mark Palim

"The market senses some uncertainty on the part of the Fed when it comes to inflation, and what looks like a plan that will keep borrowing costs ‘higher for longer.’“ - Rick Sharga, CEO at CJ Patrick Company

"I mean, to me, it's just very obvious what's happening — it's nature rebelling against us. We maxed out the credit card." - Christopher Hawthorne, Chief Design Officer for the City of Los Angeles, discussing the LA wildfires.