Market Update - March 21, 2025

Friday, March 21, 2025

This Market Update is written by our Capital Market specialists each week to bring you insight into what's happening in the market and how it may affect mortgage rates and real estate trends.

Rates are provided by Housing Wire in conjunction with Polly. Rates are updated in real-time. Polly data is calculated using **actual locked rates.** Rates are inclusive of locks that occur below par, at par and therefore consider discounts, points, and rebates. *Rates are based on a scenario with a 780 Credit Score, <60% LTV, Purchase transaction. As of 03/20/2025 – @12:00 PM EST.*

A chart titled 'A Quick Look Back,' summarizing key economic events from March 14 to March 20, 2025. The table includes Event Date, Event Name, Actual Data, Forecast, Previous Data, and Commentary. On March 14, the University of Michigan Consumer Sentiment Index fell sharply to 57.9, below the forecast of 63.1 and down from February’s 64.7. This marks the lowest sentiment level in 28 months and the largest drop since November 2022, indicating growing consumer pessimism. On March 17, Retail Sales for February increased 0.2% month-over-month, rebounding from January’s downwardly revised 1.2% decline but missing the expected 0.6% gain, suggesting a weaker-than-anticipated recovery in consumer spending. On March 18, Industrial Production rose 0.7% in February, well above the forecast of 0.2% and stronger than January’s 0.5% increase, reflecting solid growth in the manufacturing sector. On March 19, the Federal Reserve maintained its target interest rate range at 4.25% to 4.5%, as expected, while policymakers signaled plans for two rate cuts later in 2025. Their outlook also projected higher inflation and slower economic growth. On March 20, Initial Jobless Claims for the week ending March 15 came in at 223,000, slightly below the forecasted 224,000 and up from 220,000 the prior week, keeping claims within a historically stable range. Lastly, on March 20, Existing Home Sales for February rose 4.2% month-over-month to a seasonally adjusted annual rate of 4.26 million, surpassing the forecast of 3.95 million and improving from January’s 4.08 million. However, sales were still down 1.2% year-over-year, reflecting continued affordability challenges in the housing market.

Market Commentary

Interest rates remained flat for the week of March 14^th to March 20^th, 2025. The Federal Reserve’s Federal Open Market Committee (FOMC) held interest rates steady and maintained its target federal funds rate range at 4.25-4.5%, as was widely anticipated before Fed Chair Jerome Powell’s announcement on Wednesday, March 19, 2025.

The economy has some mixed signs. The projection for GDP growth in 2025 is 1.7%, which is down 0.4 percentage point from the last projection in December 2024. Meanwhile, inflation is expected to remain at 2.7% this year and fall 2.2% next year. A big question is whether the prospective drop in inflation will happen is the economy’s reaction to Trump’s tariffs, which typically cause higher prices initially. Further, there are other factors that are causing uncertainty in markets, including the debt ceiling, and fiscal policy. Markets initially reacted favorably to Wednesday's news from the Fed.

The FOMC reports that recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated, but it is down significantly from 2022, when the annual inflation rate was 8%.

So, while the Fed continues to pursue its dual goals of maximum employment and inflation at the rate of 2% over the longer run, uncertainty about the economy has increased. The FOMC will adjust monetary policy if risks emerge that could impede the attainment of its goals. The assessments consider a wide range of data, including labor market conditions, inflation pressures and expectations, financial markets, and international developments.

Fed Watch: Target rate (in bps) possibilities, according to the CME Group (as of 03/20/2025 – 12:00 PM EST):

Market Review: Optimal Blue's Production Metrics:

A chart titled: "Rate Lock Volume by Loan Purpose"

A chart titled "Mix of Business by Loan Product"

Housing Data - Zillow Research

A graphic titled "U.S. Home Price Insights - March 2025" with information on national home price growth data from January 2025. Current month-over-month is 0.04% and current year-over-year is 3.3%. Forecast month-over-month is 0% and year-over-year is 3.6%. Affordability Meter: national median home price is $375,000 and income required to afford a median-priced home is $83,400.

A graphic titled "Top 10 Hottest Markets".

A graphic titled "Which areas are affordable?" Tracking the top 5 highest and lowest median sales prices. Markets to watch: markets with "very high" risk (>70% probability) of price decline.

How Rising Costs Affect Home Affordability:

A chart titled "Single Family Serious Delinquency Rates (90+ days or in foreclosure).

Rate Reflection

The Fed left interest rates unchanged at today’s meeting, but there were tariff-related adjustments. Forecasted 2025 GDP growth slid from 2.1% to 1.7%, and 2026 growth from 2% to 1.8%. Expected 2025 core inflation rose from 2.5% to 2.8%, but hinting that tariff inflation is likely transitory, inflation forecasts for 2026 and 2027 remained unchanged at 2.2% and 2.0%, respectively. Two 25bps cuts in 25H2 are plausible. Substantial uncertainty lurks.

- Elliot F. Eisenberg, Ph.D., Economist

News You Can Use

‍

Interest rate and annual percentage rate (APR) are based on current market conditions as of 03/20/2025, are for informational purposes only, are subject to change without notice and may be subject to pricing add-ons related to property type, loan amount, loan-to-value, credit score and other variables. Estimated closing costs used in the APR calculation are assumed to be paid by the borrower at closing. If the closing costs are financed, the loan, APR and payment amounts will be higher. Contact us for details. Additional loan programs may be available. Accuracy is not guaranteed, and all products may not be available in all borrower's geographical areas and are based on their individual situation. This is not a credit decision or a commitment to lend. actual interest rate, APR, and payment may vary based on the specific terms of the loan selected, verification of information, your credit history, the location and type of property, and other factors as determined by Prosperity Home Mortgage, LLC. Not available in all states. Rate is as of 03/20/2025 and is subject to change at any time without notice. Opinions, estimates, forecasts, and other views contained in this document are those of Freddie Mac’s economists and other researchers, do not necessarily represent the views of Freddie Mac or its management, and should not be construed as indicating Freddie Mac’s business prospects or expected results. Although the authors attempt to provide reliable, useful information, they do not guarantee that the information or other content in this document is accurate, current, or suitable for any particular purpose. All content is subject to change without notice. All content is provided on an “as is” basis, with no warranties of any kind whatsoever. Information from this document may be used with proper attribution.

‍

See all articles

Other news

Friday, March 21, 2025