The most significant economic event This Week in Real Estate was the Federal Reserve, in a widely anticipated decision, maintained its benchmark interest rate unchanged for the third consecutive meeting. The Fed highlighted that labor market conditions remain strong, and inflation has shown improvement, although it remains slightly above the 2% target. The Fed also acknowledged increased uncertainty surrounding the U.S. economic outlook since its March meeting. The average 30-year fixed mortgage rate remained steady at 6.76% compared to the previous week. Sam Khater, Chief Economist at Freddie Mac, noted, “At this time last year, the 30-year fixed-rate mortgage was 30 basis points higher, and purchase applications were declining. Today, rates are lower and have remained stable for weeks, leading to continued increases in purchase applications.” A year ago, the 30-year fixed-rate mortgage averaged 7.09%. According to the Mortgage Bankers Association, purchase applications surged 11% for the week ending May 2 and were 13% higher than the same week one year ago. This follows the National Association of Realtors’ report that March pending home sales posted the largest month-over-month increase since December 2023. These two forward-looking indicators suggest favorable momentum in homebuying activity. Below are key events from the first week of May impacting our business:
FEDERAL RESERVE HOLDS INTEREST RATES STEADY. The Federal Reserve remained on pause with respect to rate cuts at the conclusion of its May meeting, maintaining the federal funds rate in the 4.25% to 4.5% range. Characterizing current market conditions, the central bank noted that the “unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid.” However, the Fed noted that “inflation remains somewhat elevated.” With respect to monetary policy, the Fed noted that uncertainty for the U.S. economy has increased. Mindful of its dual mandate (price stability and maximum employment), the Fed noted that the “risks of higher unemployment and higher inflation have risen.” While today’s statement does not explicitly reference tariff policy, the debate over tariffs is an obvious candidate for the source of these rising risks that would harm the labor market and raise prices. In the meantime, as Chair Powell noted, otherwise solid economic conditions leave the Fed with moderately restrictive policy and “in a good place to wait and see” with respect to future policy. Today’s statement noted that the Federal Open Market Committee “will carefully assess incoming data, the evolving outlook, and the balance of risks.” In particular, the Fed will review “readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.” Read the full story here.
PRICES FOR NEW HOMES CONTINUE TO DROP AS EXISTING RISES. The median price for a new single-family home sold in the first quarter of 2025 was $416,900, a mere $14,600 above the existing home sale price of $402,300, according to U.S. Census Bureau and National Association of Realtors. Both new and existing homes saw dramatic increases in prices post-pandemic due to higher construction costs and limited supply. While overall home prices remain elevated compared to historical norms, new home prices have moderated due to builder business decisions, but existing home prices continue to increase because of lean supply. The median price for a new single-family home sold in the first quarter of 2025 decreased 2.32% from the previous year. New home prices have continued to experience year-over-year declines for eight consecutive quarters. Meanwhile, the median price for existing single-family homes increased 3.38% from one year ago. Existing home prices have continued to experience year-over-year increases for seven consecutive quarters. Read the full story here.
HOME EQUITY DIPS SLIGHTLY DURING FIRST QUARTER BUT REMAINS NEAR HISTORIC HIGHS. AATTOM released its first quarter 2025 U.S. Home Equity and Underwater Report on Thursday, which shows that 46.2 percent of mortgaged residential properties in the country were considered equity-rich in the first quarter, meaning the combined estimated amount of loan balances secured by those properties was no more than half of their estimated market value. The proportion of equity rich homes was down from 47.7 percent in the fourth quarter of 2024 and has dropped each quarter since a peak of 49.2 percent in the second quarter of last year. The rate is still historically high, however, and nearly double what it was in the first quarter of 2020. “Home equity rates are near their highest points in recent years and the dip we’ve seen early this year in the proportion of equity-rich homes shouldn’t cause too much concern,” said Rob Barber, CEO for ATTOM. “In each of the two previous years, the first quarter marked the lowest point of the year before the proportion of equity-rich homes shot back up in the second quarter.” Read the full story here.
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