As mortgage rates in the United States approach 7%, the crisis alarm for the U.S. housing market has sounded again...
Data released by Freddie Mac shows that as of January 2, the average rate for a 30-year fixed mortgage in the U.S. has risen from 6.85% a week ago to 6.91%. Meanwhile, a metric from the Mortgage Bankers Association (MBA) also indicated that for the week ending December 27, the 30-year mortgage rate increased by 8 basis points to 6.97%, reaching a new high in nearly six months.
High borrowing costs are squeezing demand, leading to a nearly 7% decline in the MBA's mortgage application index for the week, the lowest level since mid-November.
Odeta Kushi, Deputy Chief Economist at First American Financial Corp, stated:
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“This is not a good start to the new year. Industry experts unanimously agree that 2025 will be a year of long-term rising interest rates for the real estate market, which is not good news.”
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It is worth noting that mortgage rates typically move in tandem with U.S. Treasury yields. Due to previous expectations from Federal Reserve officials that the pace of interest rate cuts would slow in the face of rising inflation in 2025, U.S. Treasury yields continued to climb in late December. At the beginning of 2025, the yield on the 10-year U.S. Treasury bond has slightly retreated, currently reported at 4.559%.
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Sam Khater, Chief Economist at Freddie Mac, stated: “Current rates are higher compared to the same period last year, and the resistance to market affordability persists.” Kushi believes that if mortgage rates can stabilize, even at a higher level, it may help kickstart a recovery in the real estate market. If the Federal Reserve continues to cut rates, it may promote a decline in mortgage rates.
However, despite the rise in mortgage rates at the end of the year, another metric from the National Association of Realtors shows that potential homebuyers are increasingly adapting to a higher rate environment. In November, when rates averaged around 6.8%, the indicator for signed contracts on existing homes rose to its highest level since February 2023

FMCC

High borrowing costs are squeezing demand, leading to a nearly 7% decline in the MBA's mortgage application index for the week of the 27th, reaching its lowest level since mid-November

- As of January 2, the average 30-year mortgage rate in the U.S. rose to 6.91%, up from 6.85% the previous week, signaling a potential crisis in the housing market.  
- High borrowing costs have pressured demand, leading to a nearly 7% drop in the MBA's mortgage application index, the lowest since mid-November.  
- Experts predict that 2025 will see persistently high interest rates, impacting market affordability, although some potential buyers are adapting to the higher rate environment.

Mortgage rates approach 7%, ominous signs for the U.S. real estate market