Potential signs of a friendlier housing market
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Explaining the money burning a hole in your pocket effect. I'm David Brancaccio in Los Angeles. First, 2025 was a tough year for homebuyers. Now, that said, sales for used houses and apartments jumped toward the end of last year. Marketplace's Nancy Marshall-Genzer is here. Nancy, what are some of the forces at work?
David, two things happened over the last three months of 2025 that helped people trying to buy a home.
How did housing prices and mortgage rates change at the end of 2025?
Housing prices grew more slowly and mortgage rates fell. According to Freddie Mac, the average 30-year fixed rate mortgage in December was 6.19%. A year ago, it was closer to 7%.
And homebuyers were paying attention. As I say, the fresh existing home sales look stronger.
Yeah, the National Association of Realtors says existing home sales were up by about 5% last month. After you adjust for seasonal factors, the association says December sales were the strongest in almost three years. They increased month over month in all parts of the country, and there was a year-over-year increase in the South.
Why did existing home sales strengthen in December 2025?
New home sales in October edged down, but they were still higher than over the summer.
President Trump, Nancy, has been trying to take the edge off the high cost of buying a place to live. He ordered, we reported on this, Fannie Mae and Freddie Mac to buy up to $200 billion in mortgage bonds. Will that help?
It should. Fannie and Freddie will be pushing up demand for these bonds. And of course, when demand rises, investors have to accept a lower yield or interest rates. Now, Trump also announced he's going to ban large institutional investors from buying more single family homes, but he would need Congress to enact a law he could enforce on that. Trump says he'll talk more about this at the World Economic Forum next week in Davos, Switzerland.
All right. The benchmark 10-year interest rate is up just slightly, 4.15 percent. The average 30-year fixed rate mortgage is not down in the wake of word earlier this week that the Justice Department has a criminal investigation going into the chair of the Federal Reserve amid questions about a construction project at Fed headquarters. How have financial market players been reacting to what some see as pressure to get the Fed to lower interest rates? Economist Diane Swonk has been watching bond market reaction.
Well, what's been really fascinating is even as equity market volatility picked up and market showed some jitters, we've seen the markets stay to the same pricing they had on a little over two rate cuts this year and not pricing in more rate cuts due to shifts in Fed independence. And I think that's important as financial markets think things will stay as they are with the Fed sort of locked step in a deep debate about what they should do with rate cuts going forward.
Right. So they're not saying themselves, oh, we're going to get an extra rate cut now. They're saying, well, it's probably still what we had expected just a couple of weeks earlier.
Exactly. And I think that's very important for the moment. That is keeping financial markets from being more volatile. And that is an important thing right now, given how much we are dependent upon inflation. financial market strength and the U.S. economy are so intertwined. Of course, it's not overall economic growth does not equal the stock market. But unfortunately, because affluent households are propelling growth so much, it's very important for the overall economy to avoid recession.
Speaking to Reuters yesterday, President Trump says he has no plans to fire Jerome Powell.
Regular and lower-income people are being careful in an economy where many companies are choosing not to hire. This is in contrast to higher-income people who have been out there and online spending. Time for a teachable moment on what's called the wealth effect. Here's Marketplace's Justin Ho.
The Wealth Effect is all about the assets that wealthy people own. Stocks, homes, savings accounts, crypto. Those assets can literally allow people to spend more money. For instance, you can borrow against your home equity.
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