Economists, experts say status quo for mortgage rates, home prices

Published: Friday, August 1, 2025 at 12:25 am

Housing Market Stagnation Persists Amid Economic Uncertainty

The Southern California housing market continues to grapple with high mortgage rates and elevated home prices, creating a challenging environment for potential buyers. The Freddie Mac 30-year mortgage rate remains stubbornly high, hovering at 6.72% this week, and has not dipped below 6.5% in ten months. Experts predict this stagnation will continue, with home prices likely to remain flat or experience low single-digit increases by the end of the year.

Several factors contribute to this market standstill. Economic uncertainty, including potential trade wars and related fears, is cited as a key driver. The "brother-in-law effect," where negative housing market advice from acquaintances discourages potential buyers, also plays a role. While home sales are up slightly, the overall volume of existing home sales is believed to have bottomed out.

Economists anticipate a slowdown in the economy, influenced by tariff policies and immigration. This could lead to a slight dip in home prices and interest rates. However, the "lock-in effect," where homeowners are hesitant to sell due to their low mortgage rates, is also contributing to the problem.

Despite increased inventory and some price reductions, home prices are not expected to decline significantly. Developers are focusing on more affordable housing options, with a shift towards apartments and condos. While rates may come down, providing opportunities to refinance, the overall affordability challenge remains.

BNN's Perspective: The housing market's current state reflects a complex interplay of economic forces. While the potential for rate decreases offers a glimmer of hope, the underlying issues of affordability and economic uncertainty will likely continue to shape the market. A balanced approach, considering both the challenges and potential opportunities, is crucial for navigating this environment.

Keywords: mortgage rates, home prices, housing market, affordability, economic uncertainty, interest rates, home sales, real estate, Southern California, recession, tariffs, Federal Reserve, inventory, refinancing, housing permits, lock-in effect

Full Story