Fed Recap & Real Estate Market Outlook – Summer 2025 Edition

As we move through the heart of summer, the latest update from the Federal Reserve offers both reassurance and new questions for the real estate market. Whether you’re buying, selling, or simply keeping an eye on trends, here’s what you need to know.

The Fed Holds Steady—for the Fifth Time

At its most recent meeting, the Federal Reserve kept the federal funds rate unchanged at 4.25%–4.50%, continuing a cautious approach as economic growth moderates and inflation remains slightly elevated.

Fed Chair Jerome Powell reaffirmed a “wait and watch” stance, highlighting the importance of letting data guide decisions. One eyebrow-raising moment? For the first time in over 30 years, two governors, Michelle Bowman and Christopher Waller—dissented in favor of a rate cut. That’s a rare move, and it signals internal debate about how tight policy needs to be in this evolving economic landscape.

The Broader Economic Picture

Despite the high-rate environment, the economy is showing signs of resilience:

• GDP Growth: After a small contraction in Q1, the economy bounced back in Q2 with a 3% annualized gain promising rebound even as consumer demand shows signs of cooling.
• Inflation: June’s Consumer Price Index came in at 2.7%. That’s better than last year, but still above the Fed’s 2% target—partly due to ongoing tariffs on imports.
• Jobs: The labor market remains healthy. Unemployment is low, and payrolls are strong, supporting overall economic stability even as other sectors adjust.

Mortgage Rates – Still Stuck Near 6.75%

As of July 30, the average 30-year fixed mortgage sits around 6.75%, slightly down from the week before. Freddie Mac’s survey confirms a similar trend at 6.74%.

While some economists predict a modest dip in rates in August, most expect them to stay within the 6.5% to 7% range for now—making affordability a continued challenge for many buyers.

Housing Market Trends to Watch

Even with more homes hitting the market, buyers remain cautious. Here’s a quick look at what’s unfolding:

• Pending Home Sales dropped 0.8% month-over-month and 2.8% year-over-year in June—signs of muted buyer interest, even as supply grows.
• Sellers are holding firm. Rather than reducing prices, many homeowners are choosing to delist and wait—an effort to protect equity and avoid negotiating in a rate-sensitive market.
• Home price growth is slowing. According to Moody’s, we may see a +0.5% gain in 2025, and +1.2% in 2026—with some markets like Nashville and Miami expected to see price declines of 5% or more.
• Investors are stepping in. In the first half of 2025, about 30% of single-family home sales were made by small, independent investors mostly using cash to buy affordable homes in need of light updates with rental potential.

What This Means for Buyers & Sellers

• Mortgage rates aren’t directly tied to the Fed’s decision, but they’re influenced by the broader bond market. For now, the Fed’s pause offers stability, not necessarily rate relief.
• Affordability remains the top hurdle. With rates hovering near 6.75%, many buyers are taking a “wait and see” approach. Meanwhile, sellers with low existing mortgages are less motivated to make a move.
• While we’re not expecting a crash, price stagnation or mild corrections are possible, especially in overheated markets or where investor demand pulls back.

Bottom Line: The Market Is Cooling, Not Crashing

The Fed is holding the line on rates, and mortgage costs are still high enough to keep buyers cautious. We’re seeing a market in transition: sellers are patient, buyers are selective, and investors are seizing opportunity where they see long-term value.