Homebuyers have reasons for hope heading into the holidays
Though demand dropped off ahead of Thanksgiving, falling mortgage rates and an uptick in loan applications are good signs for the market’s slow season.
Key points:
- The 30-year fixed-rate mortgage averaged 6.23% this past week, bouncing around the lowest levels of the year.
- Home price growth continues to slow and the asking price per square foot is down year-over-year — factors that are improving affordability during the market’s slowest time of year.
- As consumers turn their attention to the holiday season, data indicates that buyer demand has fallen. But it’s still possible that the new year could begin with “real momentum,” according to Realtor.com Senior Economist Jake Krimmel.
While the coming weeks are generally the housing market's slowest of the year, recent economic data is pointing to some good signs for homebuyers.
The 30-year fixed-rate mortgage dipped this week to 6.23%, according to Freddie Mac's weekly report. That's down slightly from 6.26% the week before and well below a year ago, when the rate was at 6.81%.
Mortgage News Daily (MND), which uses a different set of criteria to determine the average rate, noted a significant drop on Nov. 25. By MND's metrics, the average rate on Nov. 26 was 6.22%, around the lowest level of the past three years.
Don't expect another big rate drop
With investors growing increasingly confident that the Federal Reserve will make another short-term interest rate cut before the end of the year, it's possible that mortgage rates could tick down a bit further ahead of the central bank's December meeting.
"It is looking increasingly likely that the Fed will cut interest rates when it meets on Dec. 10. However, we should not expect that to translate into a big drop in mortgage rates," said Lisa Sturtevant, chief economist at Bright MLS.
Another factor that could impact mortgage rates is the anticipated release of backlogged government data. The latest government report came in the form of jobless claims, which fell to a seven-month low last week.
While the Bureau of Labor Statistics said it will not be releasing full labor market or inflation reports for October due to data lapses caused by the federal government shutdown, the agency is expected to release data for November after the Fed's December meeting.
"If inflation cools, the labor market rallies and the Fed delivers another cut, the housing market could enter 2026 with real momentum," Realtor.com Senior Economist Jake Krimmel said.
Mortgage applications bounce back
Ahead of an anticipated post-Thanksgiving slowdown, mortgage applications are showing signs of life. The seasonally adjusted purchase index for the week ending on Nov. 21 rose 8% from a week earlier, according to the Mortgage Bankers Association (MBA).
Government loan applications — including FHA, VA and USDA loans — rose 9% and "had the strongest week since 2023," according to Joel Kan, MBA's vice president and deputy chief economist.
More enticing home prices for buyers?
Home prices appear to be becoming more favorable for buyers. While many studies point to slower home price growth, the price per square foot has dropped 1.5% compared to a year ago, according to Mike Simonsen, chief economist at Compass. On Nov. 24, Simonsen estimated that the asking price per square foot, which dipped below 2024 levels in September and has steadily declined since then, was $210.60.
"Home prices are really the story of the moment," Simonsen said in his weekly update on YouTube. "Supply is big enough — and demand has been light enough for long enough — that many indicators of home prices have been ticking down."
Simonsen also noted that price changes can turn upward quickly when demand shifts, particularly in local markets as mortgage rates fall. However, price reductions are currently at high levels for most of the country, which could lead to price pressures next spring.
Demand heads into hibernation — for now
Not all real estate data is improving heading into the holiday season. While pending sales increased in October, that momentum appeared to be slowing in November, according to Redfin data. Signed contracts declined 2.1% year-over-year during the four weeks ending on Nov. 23 — the biggest year-over-year decline in eight months.
Redfin's Homebuyer Demand Index, which tracks home tours and other buyer demand indicators, fell to its lowest level in two months. However, Google searches of "homes for sale" hit the highest level since August, Redfin data indicated — a sign that buyer interest still lingers.