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Is 2025 a Year of Housing Market Stability? ETFs to Consider
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After being on a downward trend, falling from 7.22% in May to 6.08% in late September, the 30-year mortgage rate reversed course in November. The rate rose sharply to 6.84% late last month, following the presidential election results.
However, mortgage rates appear to be back on a favorable track as the volatility surrounding the election results has settled. The 30-year mortgage rate has fallen to 6.60% from its late November highs. This has led the market to anticipate a stable year ahead for the housing sector as uncertainty clears, though some headwinds persist.
2025 focuses less on declining interest and mortgage rates and more on fostering stability in the housing market, potentially signaling a future shift in mortgage rate trends, with conditions anticipated to improve compared to 2024.
Housing Market & the Fed
A decline in the Federal funds rate, typically has an indirect impact on mortgage rates, resulting in a drop in mortgage rates. However, the 30-year mortgage rate had an opposite reaction to the recent rate cuts by the Fed, not just failing to decrease but actually surging. However, with the December rate cut already factored in and further reductions anticipated in 2025, the market is likely to see some relief.
According to Bankrate, 2025 will not bring the significant drop many had hoped for but is an improvement for sure. Experts predict a gradual decline in mortgage rates over the coming year, resulting in market activity picking up momentum. Optimism is also rising among homebuilders, as lower interest rates open doors to greater access to capital.
Forecasting Mortgage Rates
According to US News, the 30-year fixed mortgage rate is projected to remain steady between 6% and 6.5% over the next two years. Per Fannie Mae, as quoted on US News, the 30-year mortgage rate is projected to stay at 6.7% in 2024, gradually falling throughout 2025, reaching 6.4%.
The Mortgage Bankers Association, according to US News, gave a similar estimate for mortgage rates, forecasting the rate to end the current year at 6.6%, falling in 2025 to 6.4%.
According to the National Association of Realtors (NAR), as quoted on US News, the 30-year mortgage rate is anticipated to stay at 6.69 in 2024, before falling below the 6% threshold in 2025, falling to 5.9%. However, NAR forecasts the mortgage rate to climb back above 6% in 2026.
Realtor.com, according to US News, forecast that the 30-year mortgage rate will remain at 6.7% ending the current year, before falling to 6.2% by the end of next year.
Other Factors Helping the Market
According to Business Insider, President-elect Donald Trump's policies could serve as a tailwind for sales activity, with strategists largely agreeing that tax cuts and deregulation will enhance business confidence.
However, President Trump's proposed tax cuts and increase in tariffs may put upward pressure on prices, with Wall Street analysts projecting that Trump’s campaign promises could lead to interest rates remaining slightly higher than previously forecasted.
According to Lawrence Yun, as quoted on Norada Real Estate Investments, home prices are expected to gradually increase over 2025 and 2026. Per Yun, as the market stabilizes, these modest price increases signal a steady recovery, helping maintain housing affordability without triggering sharp spikes.
Yun also anticipates that the housing inventory shortage is nearing its end. This should gradually ease supply constraints, potentially leading to more competitive pricing in the housing market.
ETFs to Consider
Rising market confidence in mortgage rates settling around 6% in 2025 points to a more stable housing market, marking a positive shift from recent volatility. With estimates of two to three Fed rate cuts next year, there’s still a possibility that mortgage rates could dip below 6%. Projections of a drop in mortgage rates increase the purchasing power of potential homeowners and investor interest.
Below, we have highlighted a few funds for investors to consider as the housing market stabilizes, providing an opportunity to gradually increase exposure to housing ETFs after a period of volatility.
iShares U.S. Home Construction ETF seeks to track the performance of the Dow Jones U.S. Select Home Builders Index with a basket of 44 securities. The fund has amassed an asset base of $3.28 billion and charges an annual fee of 0.39%.
iShares U.S. Home Construction ETF has gained 5.70% over the past month and 42.93% over the past year.
SPDR S&P Homebuilders ETF seeks to track the performance of the S&P Homebuilders Select Industry Index with a basket of 35 securities. The fund has amassed an asset base of $2.19 billion and charges an annual fee of 0.35%.
SPDR S&P Homebuilders ETF has gained 7.47% over the past month and 48.85% over the past year.
Invesco Building & Construction ETF seeks to track the performance of the Dynamic Building & Construction Intellidex Index with a basket of 31 securities. The fund has amassed an asset base of $429.8 million and charges an annual fee of 0.62%.
Invesco Building & Construction ETF has gained 12.24% over the past month and 58.59% over the past year.
Hoya Capital Housing ETF seeks to track the performance of the Hoya Capital Housing 100 Index with a basket of 100 securities. The fund has amassed an asset base of $46.9 million and charges an annual fee of 0.30%.
Hoya Capital Housing ETF has gained 7.43% over the past month and 40.89% over the past year.
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Is 2025 a Year of Housing Market Stability? ETFs to Consider
After being on a downward trend, falling from 7.22% in May to 6.08% in late September, the 30-year mortgage rate reversed course in November. The rate rose sharply to 6.84% late last month, following the presidential election results.
However, mortgage rates appear to be back on a favorable track as the volatility surrounding the election results has settled. The 30-year mortgage rate has fallen to 6.60% from its late November highs. This has led the market to anticipate a stable year ahead for the housing sector as uncertainty clears, though some headwinds persist.
2025 focuses less on declining interest and mortgage rates and more on fostering stability in the housing market, potentially signaling a future shift in mortgage rate trends, with conditions anticipated to improve compared to 2024.
Housing Market & the Fed
A decline in the Federal funds rate, typically has an indirect impact on mortgage rates, resulting in a drop in mortgage rates. However, the 30-year mortgage rate had an opposite reaction to the recent rate cuts by the Fed, not just failing to decrease but actually surging. However, with the December rate cut already factored in and further reductions anticipated in 2025, the market is likely to see some relief.
According to Bankrate, 2025 will not bring the significant drop many had hoped for but is an improvement for sure. Experts predict a gradual decline in mortgage rates over the coming year, resulting in market activity picking up momentum. Optimism is also rising among homebuilders, as lower interest rates open doors to greater access to capital.
Forecasting Mortgage Rates
According to US News, the 30-year fixed mortgage rate is projected to remain steady between 6% and 6.5% over the next two years. Per Fannie Mae, as quoted on US News, the 30-year mortgage rate is projected to stay at 6.7% in 2024, gradually falling throughout 2025, reaching 6.4%.
The Mortgage Bankers Association, according to US News, gave a similar estimate for mortgage rates, forecasting the rate to end the current year at 6.6%, falling in 2025 to 6.4%.
According to the National Association of Realtors (NAR), as quoted on US News, the 30-year mortgage rate is anticipated to stay at 6.69 in 2024, before falling below the 6% threshold in 2025, falling to 5.9%. However, NAR forecasts the mortgage rate to climb back above 6% in 2026.
Realtor.com, according to US News, forecast that the 30-year mortgage rate will remain at 6.7% ending the current year, before falling to 6.2% by the end of next year.
Other Factors Helping the Market
According to Business Insider, President-elect Donald Trump's policies could serve as a tailwind for sales activity, with strategists largely agreeing that tax cuts and deregulation will enhance business confidence.
However, President Trump's proposed tax cuts and increase in tariffs may put upward pressure on prices, with Wall Street analysts projecting that Trump’s campaign promises could lead to interest rates remaining slightly higher than previously forecasted.
According to Lawrence Yun, as quoted on Norada Real Estate Investments, home prices are expected to gradually increase over 2025 and 2026. Per Yun, as the market stabilizes, these modest price increases signal a steady recovery, helping maintain housing affordability without triggering sharp spikes.
Yun also anticipates that the housing inventory shortage is nearing its end. This should gradually ease supply constraints, potentially leading to more competitive pricing in the housing market.
ETFs to Consider
Rising market confidence in mortgage rates settling around 6% in 2025 points to a more stable housing market, marking a positive shift from recent volatility. With estimates of two to three Fed rate cuts next year, there’s still a possibility that mortgage rates could dip below 6%. Projections of a drop in mortgage rates increase the purchasing power of potential homeowners and investor interest.
Below, we have highlighted a few funds for investors to consider as the housing market stabilizes, providing an opportunity to gradually increase exposure to housing ETFs after a period of volatility.
iShares U.S. Home Construction ETF (ITB - Free Report)
iShares U.S. Home Construction ETF seeks to track the performance of the Dow Jones U.S. Select Home Builders Index with a basket of 44 securities. The fund has amassed an asset base of $3.28 billion and charges an annual fee of 0.39%.
iShares U.S. Home Construction ETF has gained 5.70% over the past month and 42.93% over the past year.
SPDR S&P Homebuilders ETF (XHB - Free Report)
SPDR S&P Homebuilders ETF seeks to track the performance of the S&P Homebuilders Select Industry Index with a basket of 35 securities. The fund has amassed an asset base of $2.19 billion and charges an annual fee of 0.35%.
SPDR S&P Homebuilders ETF has gained 7.47% over the past month and 48.85% over the past year.
Invesco Building & Construction ETF (PKB - Free Report)
Invesco Building & Construction ETF seeks to track the performance of the Dynamic Building & Construction Intellidex Index with a basket of 31 securities. The fund has amassed an asset base of $429.8 million and charges an annual fee of 0.62%.
Invesco Building & Construction ETF has gained 12.24% over the past month and 58.59% over the past year.
Hoya Capital Housing ETF (HOMZ - Free Report)
Hoya Capital Housing ETF seeks to track the performance of the Hoya Capital Housing 100 Index with a basket of 100 securities. The fund has amassed an asset base of $46.9 million and charges an annual fee of 0.30%.
Hoya Capital Housing ETF has gained 7.43% over the past month and 40.89% over the past year.