Housing Watch: What to expect in 2025

FRESNO, Calif. (KFSN) -- The new year will bring some of the same challenges for prospective homeowners.

In December, the Federal Reserve cut interest rates for the third time this year.

They're down a full percentage point since September, but expect the rate decrease to slow in 2025.

"Interest rates took the elevator going up, but they're taking the stairs coming down," explained Greg McBride, the chief financial analyst for the finance website Bankrate.

"The Federal Reserve raised interest rates at the fastest pace in 40 years. Once inflation spiked in 2022, and 2023. Now that they've started reducing interest rates, they're doing so in a much slower pace."

McBride reminds us when the fed cuts rates, it doesn't mean mortgage interest rates fall as well.

"What the Federal Reserve controls is a short term interest rate, and it has a direct bearing on things like credit card rates, home equity lines of credit," said McBride.

"But mortgage rates are based on long term interest rates. Then that's not something that the fed directly influences. Sometimes one will zig while the other zags."

McBride expects mortgage interest rates to remain on the high side in 2025, adding to the challenge of affordability.

However, he does offer some advice for those looking to buy a home.

"Continuing to build out your financial foundation, paying down debt, boosting, savings, putting yourself in the best position to capitalize once you deem the time is right," said McBride.

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