Welcome to our Market Update, written by our very own Capital Market experts. This blog is designed to give you a glance into the most important market events happening this week.
Market Commentary
Interest rates for the week of May 16th to May 22nd increased slightly. Mortgage rates are now very close to where they were at the same time last year.
The Federal Reserve is not likely to cut interest rates at its next two meetings in June and July, central officials said in interviews this week. The Fed has kept interest rates at a higher-than-usual level this year as it waits to see how President Donald Trump's tariffs will affect the economy. A weakening job market could push the Fed to lower rates, while surging inflation could force it to keep rates high. Tariffs could worsen both problems, posing a dilemma for the Fed.
Interest Rates Forecast:
Fannie Mae: Expects 30-year fixed rates to average 6.5% in 2025 and 6.2% in 2026, with a downward revision from previous forecasts.
Mortgage Bankers Association (MBA): Forecasts a 30-year fixed rate of 6.7% by the end of 2025, a slight increase from previous forecasts.
National Association of Home Builders: Predicts an average of 6.66% for 30-year fixed rates in 2025, with a forecast for rates to decrease to 6.16% in 2026.
National Association of Realtors: Projects 30-year fixed rates to average 6.4% in 2025 and drop to 6.1% in 2026.
Realtor.com: Anticipates 30-year mortgage rates will drop to 6.2% by the end of 2025.
Wells Fargo: Sits at the low end of the group, predicting the average 30-year fixed interest rate to settle at 6.35% for Q2 2025.
Freddie Mac: Suggests mortgage rates may stay "higher for longer" in 2025, potentially pushing more buyers into the market.
Fed Watch: Target rate (in bps) possibilities, according to the CME Group (as of 05/08/2025 – 12:00 PM EST):
Market Review: Optimal Blue's Production Metrics:
Pricing Power
In 2024, 40% of homebuilder sales were to first-time buyers, 15 percentage points above the 2017-2019 average. Conversely, the comparable percentage for existing home sales was 24%, down from the 2017-2019 33.3% average. Why? The median price of a new home is now 1% less than an existing house, normally they're 17% more, and between 4/1-4/15 after buydowns/sweeteners, builders offered 8% off the purchase price. New homes are great value.
- Elliot F. Eisenberg, Ph.D., Economist
News You Can Use
- Home Sales Forecast Upgraded in May Outlook
- House Republican tax bill passes 'SALT' deduction cap of $40,000. Here's who benefits
- New Listings Hit Highest Level in Nearly 3 Years
- Cost of Credit Eases for Builders and Developers
- Gains for Multifamily Missing Middle over Last Year
- Income Growth Helps Mute Existing Affordability Constraints
Interest rate and annual percentage rate (APR) are based on current market conditions as of 05/22/2025, 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 05/02/2025 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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