The mortgage market can be tricky to follow—even more so during times of fluctuating interest rates and low housing inventory. With the Federal Reserve’s anticipated rate decisions, the holiday lull, and shifting housing trends, it’s vital for first-time home buyers in New York to stay informed. Whether you’re shopping for your dream home, considering refinancing, or waiting for the perfect moment, we’ve broken down what’s happening in today’s mortgage market to help you make confident decisions.

Current Mortgage Rate Trends

To kick off, mortgage rates are holding steady yet elevated compared to historic lows, with slight movements over the past few months. As of last Friday, December 13, 2024, the national average APR for a 30-year fixed-rate mortgage was 6.95%, according to Optimal Blue. Here’s a breakdown of current APRs for various loan products:

• 15-year fixed-rate mortgage: 6.23%
• 30-year FHA: 6.32%
• 30-year jumbo loan: 7.16%
• 7/6 adjustable-rate mortgage (ARM): 6.83%
• VA loan: 6.33%

Interestingly, rates dipped in September, with 30-year fixed mortgages briefly touching the low 6% range, but they have crept back up since then. While the exact reasons for this rise remain unclear, one plausible factor is increased bond activity among investors attempting to mitigate risk.

For New York buyers, particularly in areas like Nassau County, Queens, Brooklyn, and Suffolk County, these rates may feel high. However, they are still favorable compared to the double-digit rates of the past. If you’re house-hunting, focusing on long-term affordability and leveraging first-time buyer programs can help.

Economic Indicators Impacting Mortgage Rates

The Federal Reserve is the star player in this week’s economic news. Tomorrow, December 17, kicks off the Fed’s two-day meeting, with a highly anticipated announcement expected on December 18. Markets overwhelmingly predict a rate cut, lowering the federal funds rate from its current 4.5%–4.75% range to 4.25%–4.5%. Notably, this shift could prompt lower mortgage rates early in 2025.

Here’s a quick timeline of market expectations for Fed rate movements:

• December 2024: 99.1% expectation of a rate cut to 4.25%–4.5%
• January 2025: 85% expectation rates will hold at 4.25%
• March 2025: Mixed view—40% predict rates will hold, while 50% foresee another cut

Other key economic reports this week, including GDP numbers, jobless claims, and existing home sales (due December 19), as well as personal income/outlays for November (due December 20), will further shape the rate outlook. For now, many experts, including Joe Peres, predict that interest rates may not drop significantly until late 2025.

Seasonal Effects on the Mortgage Market

As we approach the holidays, seasonal trends will play a significant role in market activity. Historically, the weeks between Christmas and New Year’s are slow as investors take time off. This means minimal activity in the mortgage and housing markets through the end of 2024. When money is “parked,” momentum stalls, but this break could lead to a renewed surge in the housing market as we transition into January 2025.

If you’re planning to buy, December can still be a good time to lock in rates or explore what’s available. With fewer buyers actively shopping, you may face less competition in the New York market.

Regional Housing Market Overview

In New York, the housing market tells an intriguing story. Inventory remains historically low, which has constrained buying opportunities. Here’s a snapshot of recent trends in Nassau and Brooklyn counties:

Nassau County Existing Home Sales:

• October 2024: 899 homes sold
• 2021 peak: 1,300–1,600 homes sold
• Inventory has fallen significantly: 2,133 homes listed for sale in October 2024, down from 4,300 in 2020.

Brooklyn Inventory:

• October 2024: 3,200 homes listed for sale
• October 2020: 6,000 homes listed

These trends highlight a sharp decline in inventory over the past several years. Many homeowners with locked-in low rates (e.g., 3–4%) are hesitant to sell and trade up for mortgages at today’s much higher rates.

The result? Homes are selling more slowly, and competition remains fierce for first-time buyers, especially when properties in good condition hit the market.

The Federal Reserve and Market Expectations

As highlighted earlier, the Federal Reserve’s actions will heavily influence 2025 market dynamics. One of the challenges we foresee relates to how quickly home prices will react to falling interest rates. When rates drop by even half a percentage point, we could see a rapid increase in home prices, similar to the housing boom of 2020–2021. Why?

• Low inventory creates scarcity: Homeowners may initially be slow to list their homes, even as buyers flood the market.
• Pent-up demand is strong: Many buyers who missed the chance to purchase during previous low-rate periods will act quickly.

According to Matthew Schnepf, this “recipe” of high demand and low supply could lead to immediate price surges as soon as rates fall. Buyers should be prepared for swift competition in 2025, especially by spring and summer.

Conclusion and Key Takeaways

For first-time home buyers in New York, the mortgage market is poised for change, but patience and preparation are crucial. Let’s review the highlights:

Current Takeaways:

• Rates remain elevated but stable: The national average for a 30-year fixed mortgage is 6.95%.
• Expect rate volatility with the Fed’s decisions: A rate cut is likely this week, with further changes expected in 2025.
• Low inventory persists: Fewer homes are listed for sale in Nassau County, Brooklyn, and across New York, meaning competition is tight.
• Prices could surge when rates drop: If you’re ready to buy, stay ahead of the competition by securing pre-approval and knowing your budget.

Your Next Steps:

1. Research first-time home buyer programs specific to New York.
2. Connect with a knowledgeable local realtor who understands the market.
3. Stay informed about Fed announcements and rate movements—timing your move could save you thousands over the life of your mortgage.

If 2024 has been a challenging year to dive into the housing market, there’s hope. With potential rate dips around the corner and continued resilience in the New York housing market, there’s opportunity ahead—if you’re prepared to act.

Let’s make 2025 the year you confidently step into your first home. Stay tuned for more mortgage market updates!