The average home price in the Portland Metro fell 1% in November. Prices are still up 4% year to date. We should see a positive annual rate of appreciation at year’s end for a 3rd consecutive year, despite the strong seasonal swings in home prices. My team has also done record sales volume for the 3rd year in a row with a projected 39 closed sales in 2025. I’m very grateful for all the repeat business and referrals. It was also a pleasure working with so many new families this year. Marissa Andersen has started hitting her stride and has made several sales recently, which I am grateful for as we look to have an even busier 2026. We have put over $4M of real estate into escrow over the last couple weeks which signals activity levels are rising as we head into the new year. I had a feeling we would see a pickup in activity leading into 2026. Given there is a strong chance we will have the lowest mortgage rates this upcoming spring since 2022, we are optimistic the market will be more active next year. The Chief Economist of the National Association of Realtors (NAR) is predicting a 14% increase in transactions in the United States in 2026 relative to 2025. Zillow’s economists are predicting a 4.3% increase by comparison.
The 30 year fixed mortgage rate averaged 6.21% and the 15 year fixed rate averaged 5.47% across the United States last week. The Federal Reserve cut the benchmark lending rate by 0.25% on December 10th. Additional rate cuts could be delayed into mid-2026 as the Fed tries to analyze where the most appropriate level to keep interest rates is given prevailing economic conditions. The Federal Reserve has been partially operating in the dark given the Consumer Price Index (CPI) and job reports for October were canceled by the Bureau of Labor Statistics following the end of the Federal government shutdown. However, we did see continuous data on a portion of the private sector jobs market from ADP. Their most recent report showed a 33,000 loss in private sector jobs in November. Overall, the job market appears to be weakening. This influenced the Federal Reserve to go ahead with the rate cut even if they don’t have all the data usually available to them.
The Fed Board of Governors are still very concerned about inflation. Three of the twelve governors disagreed with the most recent rate cut, which is the biggest disagreement during a vote on rates since 2019. At the conclusion of their meeting, the Fed released a forward projection of future rate changes as well. It only showed one rate cut in all of 2026 with one additional rate cut in 2027. I doubt things will play out that way due to the new incoming Fed Chair. Presently Kevin Hassett, economic advisor to the Trump Administration, is in the pole position to be appointed as the next Chairman of the Federal Reserve. However, his selection is far from guaranteed at this point. His name is being publicly floated to see how strong the reaction is in financial markets. The administration is trying to see if a “dovish,” also referred to as “low rate leaning,” Fed Chairman would spook investors from buying U.S. debt. Also, the administration is trying to determine the impact on interest rates. The yields of debt maturing in 1-5 years initially fell upon the news of Kevin Hassett being under strong consideration, while longer-dated bonds of 20-30 years had their yields increase. This was due to concerns about the ongoing independence of the Federal Reserve. If foreign investors think that the new Fed Chair or enough of the Fed Board of Governors can be swayed by external pressure, that could increase the chances of them mismanaging the U.S. economy. The more perceived risk there is by foreign investors, the higher interest rates on longer-dated U.S. debt could go.
Over the last quarter, the 30 year fixed rate hit the lowest average over a 3 month period since late 2022. In 2026 we are likely going to witness lower mortgage rates. This will likely lead to more aggressive home buyers during the spring market. If affordability in real estate improves further, the window to buy at lower interest rates will close faster than you think. The same thing goes for refinancing your mortgage. Over 20% of mortgages in the United States are over 6%. A refinance boom is starting to occur and it will likely further intensify as rates continue to drop. We need to remember where we came from. The 30 year fixed rate has come down almost 2% from it’s peak in October 2023. Some lenders are presently offering rates in the 5.875%-5.99% range on a 30 year fixed mortgage today, depending on the loan product. It’s uncertain if we will ever see 3% mortgage rates again but 5% is pretty low from a historical standpoint. If anyone needs a referral to a good lender, please let me know.
