The real estate scene has made a fast and furious start to 2025 with speculation of property tax reductions from the new Trump administration, and sobering forecasts about the cost of a mortgage this year.
The Federal Reserve has announced it’s not going to follow through on an anticipated campaign of incremental interest rate cuts at the moment.
Having dropped the cash rate guidance from 4.75% to 4.5% in mid-December, many pundits had predicted even cheaper mortgage costs were on the way.
Mortgage provider Fannie Mae now says the change in the Fed’s attitude means we’re likely to see the retail rate for a 30-year fixed mortgage hover around 6.8% this year.
According to Freddie Mac figures, we’re seeing mortgage rates remain in the 7% zone currently. It calculated the average rate at 6.85% for the past month and said it hasn’t dropped below 6.8% since the Fed dropped its cash rate on December 18.
Nevertheless, the current 4.5% cash rate is an improvement on the 5.5% that was still pushing mortgage costs to nudge 8% back in August.
A statement from Fannie Mae’s Economic and Strategic Research Group suggested that sentiment was moving in a positive direction.
Sales were likely to be 22% below pre-Covid levels, but that’s an uptick on sales for last year and 2023, which hit 30-year lows.
This is why the Trump administration is talking about reducing or even axing property tax to ignite the market.
Home prices are benefiting from the current market conditions.
Industry researcher CoreLogic says they rose 3.9% in the year to December. According to these numbers, Boston hit an all-time high.
As a buyer, you need to consider your options.
If you’re financially and emotionally ready to buy, there’s little point in stalling. Values are likely to rise steadily even without additional stimulus.
Below are some buyer tips for the current market.
Money Matters: With mortgage rates likely to remain elevated, calculate your maximum affordable monthly payment, factoring in property taxes, insurance and potential maintenance costs.
Think Long-Term: If you plan to hold the property for the long term, the 3.9% annual growth in value could offset the higher interest costs over time. Remember, unless you’re an investor or developer, you should play the long game.
Research Locations: Identify the neighborhoods and property styles that appear to be beating the value growth average.
Keep Perspective: It’s good to stay informed about inflation, employment rates and potential policy changes. However, don’t let these overwhelm you. Instead, focus on your own situation to decide when you’re ready to buy.