US 30-year fixed-rate mortgage rate seen averaging 6.7% in Q1

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Mortgage rates forecast staying higher through the first half

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Existing home sales seen sluggish; housing starts little changed

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House price growth estimated to slow to 3.5% from 5.8% in 2024

By Lucia Mutikani

WASHINGTON, Jan 22 (Reuters) - U.S. mortgage rates are likely to remain elevated through at least the first half of the year, keeping homebuilding and sales of previously owned homes subdued, a survey showed on Wednesday.

Mortgage finance agency Fannie Mae's Economic and Strategic Research Group estimated the popular 30-year fixed-rate mortgage averaging 6.7% in the first quarter, unchanged from the final three months of 2024.

It was forecast edging down to an average rate of 6.6% in the second quarter. The 30-year fixed-rate mortgage rose to an eight-month high of 7.04% last week.

Mortgage rates increased late last year in tandem with U.S. Treasury yields, which have jumped amid economic resilience, especially the labor market, and investor worries that President Donald Trump's plans for tax cuts, broad tariffs and mass deportations could fan inflation.

Trump was sworn in on Monday. Those concerns and the economy's sturdiness contributed to the Federal Reserve trimming its projected interest rate cuts for this year to only two from the four it estimated in September when it launched its policy easing cycle.

"While we still see signs of resilience in the labor market, the higher mortgage rates that are associated with a growing economy will likely continue the affordability challenges faced by many potential homebuyers," said Mark Palim, chief economist at Fannie Mae. "Due to the ongoing lock-in effect and affordability constraints, we currently expect another year of sluggish existing home sales."

Existing home sales were forecast falling to a rate of 4.013 million units in the first quarter from a pace of 4.093 million units projected for the October-December quarter.

They were seen edging up to a rate of 4.080 million units in the second quarter. Many homeowners have mortgage contracts with rates below 5%. That is reducing the incentive for some to put their houses on the market, contributing to a supply squeeze in some regions that is keeping home prices elevated.

Housing starts were forecast little changed at a rate of 1.312 million units in the first quarter and dipping to a pace of 1.300 million units in the April-June quarter. About 1.364 million housing units were started in 2024, down 3.9% from 2023.

But new home sales were forecast rising to a rate of 720,000 units in the January-March quarter and increasing to a pace of 736,000 units in the second quarter. House price growth was expected to slow to 3.5% this year from 5.8% in 2024, though this was likely to vary considerably by location due in part to regional differences in construction activity and the current supply of homes for sale.

"A silver lining for affordability is that we also anticipate income growth will outpace both home price and rent growth this year, and in many markets, new homes are now priced competitively with existing homes and are far more available," said Palim. "On a national level the 2025 housing market is shaping up to feel a lot like 2024." (Reporting by Lucia Mutikani; Editing by Andrea Ricci)