Mortgage Rates Up, Forecasts in 2 Key Real Estate Markets

As we close out the year, mortgage rates have climbed to 6.85%, marking a slight increase from where they began. This shift impacts the real estate markets in Texas and Florida. Texas shows mixed signals with a rise in home sales but fewer new listings and construction starts. Meanwhile, Florida’s market thrives on population growth, remote work trends, and new construction. Expert insights point to ongoing housing supply challenges and the need for a strong economy to support market growth.

Dive into our analysis to understand what these changes mean for buyers and investors in 2025.

Key Points

• Mortgage Rate Increase: The average 30-year fixed-rate mortgage rate rose to 6.85%, up from 6.72% the previous week.
• 15-Year Mortgage Rates: The average 15-year mortgage rate increased to 6% from 5.92%.
• Federal Reserve’s Influence: The rise in mortgage rates follows the Federal Reserve’s recent meeting, where officials signaled fewer interest rate cuts next year than previously expected.
• Housing Market Challenges: Despite a slight improvement in new and existing home sales, the market remains challenged by an undersupply of homes.

While a slight improvement in new and existing home sales is encouraging, the market remains plagued by an overwhelming undersupply of homes. A strong economy can help build momentum heading into the new year and potentially boost purchase activity.

Sam Khater, Freddie Mac’s chief economist

Rates and Trends in Texas Real Estate

The Texas housing market’s challenges with undersupply and the need for a strong economy to boost purchase activity are echoed recent trends. The expected increase in inventory and balanced market conditions align with Khater’s emphasis on the importance of a stable economic environment to support the housing market’s growth.¹

• Current Market Trends: The Texas housing market shows mixed signals, with a recent increase in home sales but a slowdown in new listings and construction starts.
• Home Sales and Prices: Statewide home sales increased by 4.8% in September, with Houston showing the strongest growth. However, home prices edged up only slightly, indicating a more balanced market².
• Interest Rates: Interest rates have been decreasing, which could boost the housing market by making mortgages more affordable. However, rates are expected to remain relatively low without dramatic drops.
• Future Predictions: The market is expected to shift towards a more balanced state, with moderate home price growth and increased inventory levels. Buyer competition is likely to ease, and new construction may slow down slightly.

Real Estate Outlook in the Sunshine State

The Florida real estate market outlook for 2025 is quite promising, with several key factors driving growth.

• Interest Rates: Expected to stabilize or slightly decline, potentially boosting buyer interest and affordability.
• Population Growth: Continued influx of new residents from higher-tax states, driving demand for homes.
• New Construction: Increased new construction projects to address housing supply shortages, especially single-family homes and multifamily developments.
• Remote Work: Ongoing trend of remote work attracting buyers to suburban and rural areas for larger homes and outdoor spaces.
• Investment Opportunities: Strong rental demand in tourist areas and growing interest in 55+ communities.

Florida vs Texas, Real Estate Forecasts

In contrast, the Texas real estate market shows some differences³:

• Market Trends: Texas has seen mixed signals with a recent increase in home sales but a slowdown in new listings and construction starts⁴.
• Home Prices: Texas home prices have edged up slightly, indicating a more balanced market.
• Interest Rates: Similar to Florida, Texas has experienced decreasing interest rates, which could boost the housing market.
• Future Predictions: Texas is expected to shift towards a more balanced state with moderate home price growth and increased inventory levels.

While both states face challenges with housing supply and demand, Florida’s market is driven by population growth and remote work trends, whereas Texas shows a more balanced market with moderate growth expectations.

Sources

1. Norada Real Estate, Texas Trends in the Next Two Years – 2025 and 2026 ↩︎
2. American Banking Journal, stats on housing trends in Sept.2024. ↩︎
3. Metro Tex, featuring data from Texas A&M Real Estate Research Center ↩︎
4. Real Estate Industry Trends by Driftwood Equity Partners ↩︎