Why New Homes Come With Lower Mortgage Rates, and What It Means for You

According to Realtor.com, one surprising trend is gaining traction in today's housing market: buyers of new-construction homes are getting significantly lower mortgage rates compared to those purchasing existing homes. In 2024, the average rate for new homes was 6.1%, while existing homes averaged 6.6%.

Understanding Mortgage Rate Buydowns

This difference is largely due to a strategy called a mortgage rate buydown. In these arrangements, builders pay an upfront fee to reduce a buyer’s interest rate, either temporarily or permanently. With interest rates remaining elevated, these incentives help reduce monthly mortgage payments and make new homes more attractive to budget-conscious buyers.

As the chart below illustrates, the mortgage rate gap between new-construction and existing homes has widened significantly in recent years, peaking at a 0.5% difference in 2024.

Implications for Homebuyers

For buyers, especially first-timers, these incentives can be a game-changer. Not only are monthly payments lower, but new-construction homes also come with modern layouts, energy-efficient features, and minimal upfront maintenance needs—appealing perks that add value beyond the financing.

Considerations for Sellers of Existing Homes

Sellers of previously owned homes face growing competition. To attract buyers, they may need to offer comparable incentives, such as covering closing costs, offering home warranties, or adjusting their pricing strategies to remain competitive with new builds that come with rate buydowns.

Advice for Renters and Investors

Renters considering homeownership may find this an opportune time to enter the market via new builds—especially if they can secure one of these rate incentives. For investors, the expanding gap between new and existing home financing could affect rental market dynamics, competition, and long-term property values.

Navigating Today’s Housing Market

Whether you’re buying your first home, preparing to sell, evaluating rentals, or expanding your investment portfolio, understanding mortgage rate trends like these is key to making informed decisions.

Contact us below if you need guidance tailored to your specific goals—whether it's buying, selling, renting, investing, or navigating mortgage options in today's shifting real estate landscape.

Mortgage Rates Hold Steady—But for How Long? The Fed’s Decision Explained

At its latest meeting on May 7, 2025, the Federal Reserve decided not to change interest rates — again. For many people, especially those thinking about buying or selling a home, this might sound like complicated financial news. But it has very real effects on your mortgage, your buying power, and the overall housing market.

Here’s what’s going on, in plain English.

What Is the Federal Reserve and Why Do Rates Matter?

The Federal Reserve (or “the Fed”) is like the steering wheel for the U.S. economy. When inflation is too high, they raise interest rates to slow things down. When the economy is struggling, they may lower rates to help things pick up.

The Federal Open Market Committee (FOMC) meets regularly to decide whether to raise, lower, or hold these rates. Right now, they’ve chosen to hold rates steady at 4.25% to 4.5% — the same range it’s been for three meetings in a row.

What Did Jerome Powell Say?

Fed Chair Jerome Powell said that the economy is growing, but there are big uncertainties — especially from new tariffs (taxes on imports) and other global economic pressures.

Here are the key takeaways:

• Inflation is still a concern, so the Fed doesn’t want to lower rates yet.

• New trade tariffs could slow inflation progress, possibly delaying any future rate cuts by up to a year.

• Powell also made it clear that the Fed is independent — it won’t bow to political pressure, even as President Trump publicly calls for rate cuts.

What Does This Mean for Mortgage Rates?

Mortgage rates don’t exactly follow the Fed’s decisions, but they’re influenced by them. Here’s how it breaks down:

• When the Fed holds rates steady, mortgage rates tend to level off or rise slightly.

• If inflation fears continue, lenders may keep mortgage rates higher to protect against risk.

• Don’t expect major drops in mortgage rates anytime soon — buyers and refinancers should plan accordingly.

So, if you’re house-hunting or considering a refinance, don’t wait around for a big drop. Rates might stay right where they are for a while.

What About the Housing Market?

Holding rates steady affects the housing market in a few ways:

1. Home Prices May Stay Flat or Grow Slowly

• Higher mortgage rates reduce how much buyers can afford, which can put a lid on rising home prices.

2. Buyers May Be More Cautious

• Some buyers might hesitate, hoping for lower rates. But others will jump in now, not wanting to risk rates going even higher.

3. Sellers Might Need to Adjust

• With fewer bidding wars and buyers stretching budgets, sellers may need to price homes more competitively.

4. Investors and Renters

• Real estate investors watching mortgage rates will be cautious, and rental demand could stay strong if fewer people buy.

Bottom Line: What Should You Do?

Even though the Fed didn’t change rates, the message is clear: they’re playing it safe. That means we could be in a “wait and see” period for the rest of the year.

If you're a buyer: Focus on finding the right home, not timing the market. Today’s rates might be as good as it gets for a while.

If you're a seller: Be realistic about pricing. A slower market means buyers are more selective.

If you're an investor or renter: Keep an eye on demand. Stable rates may create opportunities — but you’ll need a smart, local strategy.

Need Help Making Sense of the Market?

Whether you’re buying, selling, investing, or just exploring your options, we’re here to help.

Contact us below for expert guidance on how today’s market affects you — and how to move forward with confidence.

Are Rising Wages Enough to Buy a Home in 2025?

When your paycheck goes up, but the dream home still feels out of reach—rising wages aren't keeping pace with housing costs in 2025.

The April 2025 jobs report delivered encouraging news: 177,000 new jobs were added to the U.S. economy, the unemployment rate held steady at 4.2%, and average hourly earnings climbed 3.8% year-over-year. It’s a sign of a resilient labor market—and a glimmer of hope for Americans feeling the squeeze of inflation.

But for those hoping to buy a home this year, the real question isn’t just whether they’re earning more. It’s whether that income is enough to actually afford a house in today’s market.

Wages vs. Home Prices: A Persistent Gap

While a 3.8% wage bump is a healthy gain, it’s not outpacing the housing market. According to recent reports, national home prices have been rising between 5% and 6% annually in 2025, depending on the region and property type. Add in stubbornly high mortgage rates—hovering near 6.8% on average—and affordability becomes an even steeper challenge.

To put it plainly: even as workers are earning more, the cost of buying a home continues to rise faster.

What It Means for Different Buyers

First-time buyers are arguably hit the hardest. These are often younger buyers with smaller savings and no equity to roll into a new purchase. While their wages may have improved, the higher cost of homes—and the larger down payments required—are still pushing the dream of homeownership further out of reach.

Move-up buyers do have the benefit of equity in their current home. If they’re selling in a market that’s seen strong appreciation, their wage gains could help them manage a larger mortgage for a more desirable home. But that equation still depends on interest rates and how far their income can stretch in their target neighborhood.

Renters trying to save to buy face a tough road. Rents have continued to rise in many markets, which can eat into the very wage gains that might help with a down payment or debt-to-income ratio.

➡️ Whether you’re hoping to buy your first home, upgrade to a larger space, or break free from rent, it’s more important than ever to work with a team that understands how wages, rates, and home prices intersect. We help buyers navigate pre-approvals, affordability strategies, and local market dynamics every day—contact us below to get started.

Sellers and Investors: Don’t Assume Buyers Can Pay More

For sellers, it may be tempting to assume that wage growth means buyers are ready to stretch their budgets. But in many cases, income isn’t keeping up with overall living costs or borrowing costs. Pricing too aggressively could lead to longer time on market or unexpected negotiation pressure.

Real estate investors, meanwhile, need to evaluate whether tenant income growth is strong enough to support rental increases. A healthy labor market helps, but rent hikes that outpace local wages could lead to higher vacancy risk or turnover.

What to Watch—and How to Prepare

Looking ahead, the tug-of-war between wages, rates, and inflation will continue to shape the housing market. Even modest wage gains are meaningful—but they must be paired with smart financial planning and realistic expectations.

For buyers, it may mean exploring creative financing options like seller concessions, interest rate buydowns, or down payment assistance. For sellers, it means working closely with experienced agents to price strategically. And for investors, it’s about aligning acquisition decisions with rental market fundamentals, not just macro trends.

Get Real About Affordability

We help buyers, sellers, and investors make smart real estate moves—even in a complex market. If you’re looking to understand what your income or property is worth in today’s conditions, contact us below for expert guidance.