Pending sales fall — but mortgage rates probably won’t
Concerns about inflation, the labor market and the health of the U.S. economy at large could push rates higher in the coming weeks and months, economists warn.
Key points:
- New listings and pending sales have slowed, pointing to a weakening of both supply and demand amid the housing market’s seasonal slowdown.
- Mortgage rates are holding steady following the Fed’s widely expected decision to cut short-term interest rates on Dec. 10.
- Heading into the final weeks of 2025, the national economy continues to present a murky picture — especially in terms of the mixed signals coming from the labor market.
Homebuyers and sellers appear to be taking a wait-and-see approach toward the housing market in the final weeks of 2025 — a trend that echoes the strategy that the Federal Reserve has now set for shaping monetary policy in the months ahead.
This week's economic data shows that the market's traditional seasonal slowdown is mixed with general economic uncertainty heading into the new year as sellers and buyers both hold back.
New listings, pending sales fall
New listings of U.S. homes fell 1.7% in the four weeks ending Dec. 7 — the biggest year-over-year decline in more than two years, according to Redfin. Pending sales for the same period fell 4.1%, marking the biggest drop in 10 months.
Redfin data also indicates that the median number of days a home spent on the market hit 51 — six days more than a year ago.
"Some would-be sellers are sitting tight because the market is flat," said Josh Felder, a Redfin Premier agent in San Francisco, in the report. "That's partly because we're heading into the normal seasonal slowdown, and partly because prospective sellers and house hunters are watching and waiting to see what's going to happen next year with rates, the stock market and tariffs."
As for the year ahead? "Some homeowners will put their home on the market in 2026 when they have a better idea of how the economy will shape up," Felder predicted.
Mortgage rates steady following Fed cut
For those currently in the market to buy a home, mortgage rate changes remain in a narrow range. Freddie Mac estimated that the 30-year fixed-rate averaged 6.22% as of Dec. 11, up slightly from 6.19% one week prior. Mortgage News Daily, which uses a different set of metrics, noted that rates dropped slightly following the Fed's widely expected Dec. 10 decision to cut short-term interest rates.
Mortgage rates could increase slightly in the final weeks of 2025 as investors digest the mixed opinions that emerged from the Fed's meeting this week, according to Lisa Sturtevant, chief economist at Bright MLS. "Concerns about the potential for inflation to rebound in 2026 could also lead to higher mortgage rates in the weeks or months ahead," Sturtevant said.
If rates stay around this level in 2026, affordability will slightly improve, according to Anthony Smith, senior economist at Realtor.com. "While this is unlikely to deliver the sharp relief some buyers are hoping for, rates are expected to be low enough to help counterbalance continued, but modest, home price growth," Smith said.
Refinance mortgage applications tick up
While pending sales have slowed, mortgage applications ticked up this week, according to the Mortgage Bankers Association (MBA). Refinance applications led the way, with that index up 14% on a seasonally adjusted basis for the week ending Dec. 5 compared to the week before. Purchase applications were down slightly from one week earlier.
"Conventional purchase applications were down for the week, but there was a 5 percent increase in FHA purchase applications as prospective homebuyers continue to seek lower downpayment loans," said Joel Kan, MBA's vice president and deputy chief economist.
Labor market sends mixed messages
With several key economic reports skipped or delayed due to the federal government shutdown this fall, the national economy continues to present a muddled picture — particularly when it comes to the job market.
Initial jobless claims increased by 44,000 to a total of 236,000 for the week ending Dec. 6, according to the Labor Department. That's the biggest jump since March 2020, according to Bloomberg. But one week earlier, Labor Department data indicated that initial jobless claims were at the lowest level in over three years.
This labor market uncertainty combined with the unknown of whether tariffs will have a lasting impact on inflation prompted the Fed to signal that it may hold off on additional short-term interest rate cuts in early 2026. The central bank also indicated that it wants to see what the economic impacts of three consecutive rate cuts will be before making more policy shifts.