CHM Blog

The summer of ’25 and the great housing disconnect

During times like these, even a small boost is good news in the real estate market. But don't break out the booze just yet; it’s only a slight shift, not yet a trend.

Fannie Mae's latest Home Purchase Sentiment Index climbed from 69.8 to 71.8, suggesting people are feeling slightly less gloomy about the housing market than they were in June, as reported by Realtor.com’s researcher Joel Berner.

The good news is that fewer people are lying awake at night worrying about getting fired. Job loss fears dropped from 29% to 24% among respondents — a welcome relief after months of tariff-related jitters shaking up the labor market. When you're not constantly checking over your shoulder at work, it's easier to think about making a major purchase like a home.

Here's where things get interesting, however. While people are feeling more secure in their jobs, they're more pessimistic than ever about actually buying a home right now. July saw the most negative responses to the question, "Is now a good time to buy?" — since January. Kind of like that deer-in-the-headlights look you get when sitting down in abject hunger at a restaurant and discovering everything costs twice what you expected to pay.

But how can you blame them when they live in a world of sky-high home prices and mortgage rates that make their parents' stories of 3% pandemic-era loan refinances sound like fairy tales?

Meanwhile, sellers are stubbornly optimistic despite the fact that their homes may sit on the market longer, they’ll have to eventually cut their prices, and some might even get pulled off the market altogether.

That proverbial crystal ball? “The future remains cloudy,” says the lady in the turban when it comes to mortgage rates. Survey respondents ended up being split three ways: 39% think rates will stay put, 32% are hoping they'll drop, and 28% fear they'll climb even higher. Berner’s forecast suggests rates could fall by year's end if the Federal Reserve decides the economy needs some help. Still, it’s a far cry from the rock-bottom rates that existed just a few years ago.

Prepare for a plot twist? People are surprisingly bullish on home prices, according to Berner. “Nearly half expect prices to keep rising over the next year, while only 18% think they'll fall,” he says. Translated into realistic jargon, that means that if mortgage rates do come down as expected, all that pent-up demand could send prices soaring even higher — even into a frenzy, similar to what we saw in late 2024 when modest rate drops sparked a buying surge.

Realtor, TBWS

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I'm among few mortgage professionals who have access to live trading screens during market hours.

Rates Currently Trending: Neutral

Mortgage rates are getting a little support this morning. The MBS market improved by +6 bps last week. This was not enough to decrease mortgage rates or fees. The market experienced high volatility last week.

This Week's Rate Forecast: Neutral

Three Things: These are the three areas that have the greatest ability to impact rates this week. 1) Inflation, 2) Domestic News and 3) Geopolitical.

1) Inflation: We will get CPI on Tuesday and PPI on Thursday. We also get Import and Export Prices and Inflation Expectations in the Consumer Sentiment Report on Friday. The main focus will be on CPI which is expected to increase by 0.2% on the headline number and 0.3% on the core.

2) Domestic News: Retail Sales will get the most attention from traders this week on Friday. Will the very weak Consumer Credit report portend and a weak Retail Sales report?

3) Geopolitical: It looks like we have a summit scheduled on Friday in Alaska between Russia and the US. Could there be some sort of agreement on Ukraine? Would Ukraine and Europe even agree? We will also have the ebb and flow of changing trade/tariff terms throughout the week.

The Fed: Here is this week's schedule:

08/12 Barkin, Schmid

08/13 Barkin, Goolsbee, Bostic

08/14 Bakin, Balance Sheet

This Week's Potential Volatility: High

This morning markets saw some sideways trading within a narrow range but we remain within our better trading channel. Volatility has started at low levels but will increase later in the week.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Richard Sardella has been actively managing and providing services in the mortgage industry for over 30 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

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