Agency Economic Summary, Q1 2025
Market Optimism with Concerns of Inflation
The real estate market has always been overly optimistic about Federal Reserve rate cuts. As recently as October 2024, the market expected two to seven cuts with only two Fed meetings ahead of them. The market’s expectations reflect more hopes and dreams than sound, fact-based reality. The question now is, what if inflation picks up more than it has recently, either by a strengthening economy or other inflationary factors?
Interest Rate Cuts Finally, but the 10-year Mortgage Rate Moved Indirectly
Whether the threat of tariffs is more talk than anything else is up in the air and can impact any presumed inflation. It may be much ado about nothing. The U.S. continues to be the deepest and most stable market globally and that should help keep yields in a reasonable range. As of now, the 10-year mortgage rate is reacting negatively, and we in the title business are feeling the impact.
Life Events Are Causing Real Estate Market Moves
How will anticipated corporate tax rate cuts affect inventory? If tax cuts are not financed by spending reductions, they will increase an already bloated fiscal deficit and further revive inflation. And there are labor-rate impacts, particularly in the construction sector, from changing immigration policies.
We should expect muted Fed actions with respect to rate cuts, at least in the first quarter of 2025, and we must assume no rate cut until inflation begins a multi-month downward trend again. It may be counter to what the market desires, but there is no justifiable reason to introduce a rate cut with a strong economy, inflation concerns, and decreasing unemployment. The economy appears strong with rates as they stand.
Residential Interest Rates Continue to Hover Above 6%
Fannie Mae and MBA continue to see the 30-year mortgage interest rates above 6% in 2025 with slight relief at the back end of the year, while MBA suggests a 7% rate in 1Q25. If the 10-year mortgage rate moves downward and approaches the low 4% range in the first or second quarters, we could see lower 30-year mortgage rates and regain some year-over-year growth greater than 5%, especially if the refinance market gets relief.
As for sales volume, Fannie Mae and MBA residential real estate forecasts for 2025 have come down from their fall forecast of 9% but remain a welcome improvement from 2024’s average 3.8% year-over-year growth.
What Title Agents Should Do Next
Do you need to adjust your title agency’s performance expectations against budget? How the first quarter plays out from a macroeconomic and policy standpoint will be important. Relative to our expectations only months ago, 2025 may be like 2024 with a bumpy first quarter.
Disclaimer:
The information provided here is for general informational purposes only, should not be relied upon, and is subject to change without notice.
Download the Report to Get Perspective and Plan Ahead
Information has always been the best defense against uncertain market conditions. Agents need to be informed and prepared to succeed. Download Jeff Lanier’s Q1 2025 Economic Report and take appropriate action to protect your business interests.
Interested in Learning More? View These Other Economic Reports:
Stewart Agency Economic Summary Report, 4Q24
Stewart Agency Economic Summary Report, 3Q24
Stewart Agency Economic Summary Report, 2Q24
Stewart Agency Economic Summary, 1Q24