This Market Update is written by our Capital Market specialists each week to bring you insight into what's happening in the market and how it may affect mortgage rates and real estate trends.
Market Commentary:
From December 12th to December 18th, interest rates remained flat. The Federal Reserve lowered its key Federal Funds Rate by a quarter point (0.25%) to a target range of 3.5% to 3.75%, marking their third consecutive cut as they aim to balance inflation and employment, while Treasury yields saws light fluctuations, with the 10-year yield around 4.14% by December 18th.
The latest Consumer Price Index was below what economists had expected and likely reflects what they called distortions caused by the government shutdown. The lower than expected inflation numbers have also increased bets on the Fed lowering interest rates sooner rather than later. A downward inflation trend would ease the job of the Federal Reserve, whose leaders must decide whether to continue lowering interest rates at their next meeting, in January 2026.
FedWatch: Target rate (in bps) possibilities, according to the CMEGroup (as of 12/18/2025 – 12:00 PM EST):
Top 100 Most Affordable Places to Buy a Home
November Market Report and 2025 Market Trends in Review
Data Deluge:
Following the recent data dump, it’s clear the labor market continues to cool. The unemployment rate is at 4.6% and is rising almost fast enough to heighten recession concerns. Moreover, manufacturing employment is declining, annual wage growth softens, and November’s 3.5% Y-o-Y rise is the weakest since 6/21. Lastly, October retail spending was flat M-o-M in nominal terms, down after inflation. The economy is deteriorating, how much more is TBD. -Elliot Eisenberg, Economist
News You Can Use:
· Inflation drops to lowest level in months, defying expectations of uptick - ABC News
· Fed chair candidate Waller says he will urge Trump to keep Fed independent
· MBA: November New Home Purchase Mortgage Applications Increased 3.1%
· Jobs report November 2025: Payrolls rose by 64,000 after falling by 105,000 in October
· Builder Sentiment Inches Higher but Ends the Year in Negative Territory – Eye On Housing
· Suburban St. Louis Is the Most Affordable Place to Buy a Home
· Mortgage Rates Predictions for the Next Three Years: 2026 to 2028
· Homebuilder Lennar Cuts Prices by 10% Amid Weak Demand
*Communication is intended for Industry Professionals only and not intended for Consumer Distribution
Interest rate and annual percentage rate (APR) are based on current market conditions as of 12/18/2025, are for informational purposes only, are subject to change without notice and may be subject to pricing add-ons related to property type, loan amount, loan-to-value, credit score and other variables. Estimated closing costs used in the APR calculation are assumed to be paid by the borrower at closing. If the closing costs are financed, the loan, APR and payment amounts will be higher. Contact us for details. Additional loan programs may be available. Accuracy is not guaranteed, and all products may not be available in all borrower's geographical areas and are based on their individual situation. This is not a credit decision or a commitment to lend. actual interest rate, APR, and payment may vary based on the specific terms of the loan selected, verification of information, your credit history, the location and type of property, and other factors as determined by Prosperity Home Mortgage, LLC. Not available in all states. Rate is as of 12/18/2025 and is subject to change at any time without notice. Opinions, estimates, forecasts, and other views contained in this document are those of Freddie Mac’s economists and other researchers, do not necessarily represent the views of Freddie Mac or its management, and should not be construed as indicating Freddie Mac’s business prospects or expected results. Although the authors attempt to provide reliable, useful information, they do not guarantee that the information or other content in this document is accurate, current, or suitable for any particular purpose. All content is subject to change without notice. All content is provided on an “as is” basis, with no warranties of any kind whatsoever. Information from this document may be used with proper attribution.
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