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77 September 2025 J O U R N A L themortgagepoint.com September 2025 » Home Sales & Prices Remain a Financial Hurdle for Americans The report showed that a sharp regional difference also complicates the situation. Slower sales and price reductions have resulted from supply ex- ceeding demand in the South and West. With over 50% of both new and existing home listings as of July 2025, the South surpassed its 39.4% share of American households in terms of housing supply. On the other hand, the Midwest and Northeast continue to be competitive markets with strong demand and little supply. This geographical fragmentation highlights the significance of localized strategies for buyers, sellers, and govern- ments alike, and makes it more difficult to assess national patterns. The housing market is not experi- encing a crisis in spite of these difficul- ties. The majority of homeowners have a sizable equity balance. Low interest rates are locked in for many. Further, even if activity has slowed, the foundations have not changed. Conditions for a healthier, more balanced market may progressive- ly materialize as interest rates start to decline and market players modify their expectations. Additionally, mortgage rates in 2019 ranged from 3.5% to 4.5%, with a downward trend as the year went on. Although they weren't the lowest rates ever recorded during the COVID-19 pandemic years that followed, they were significantly lower than what we currently observe. Rates have really been persistently high in 2025, spending the majority of the year in the 6.5% to 7% area. Consider a $400,000 house to see how that impacts monthly budgets: With a 20% down payment and a 4% interest rate, the monthly principal and interest payment would be around $1,500. That loan costs $2,100 a month at a 6.75% interest rate, which is close to what experts have seen lately. The difference in monthly financing costs is $600, or $7,200 annually. Milwaukee, Houston, Baltimore, New York City, and Kansas City have had the biggest declines in purchas- ing power over the last six years. Less notable salary growth has been observed in the markets, which has only made the problems with housing affordability worse. In 2019, a Milwaukee household with a typical income could purchase a home for $314,000. A median-earning household could now afford a $281,000 home, a 10.5% decrease. The homeownership rate is under pressure to decline, particularly for younger households, as buyers are compelled by declining purchasing power to choose smaller homes, longer commutes, or to put off home purchases entirely. Due to a shortage of reason- ably priced inventory and deteriorating affordability conditions, buyers are deterred from entering the market and postponing their plans to purchase a property. As a result of this change in buyer demand, sellers increase prices to attract more activity, and homes remain on the market longer. MORTGAGE RATE SPREAD OFFERS GOOD NEWS FOR BUYERS NATIONWIDE M ortgage rates have been able to decline further than treasury yields because the mortgage spread, or difference between 10-year treasury yields and mortgage rates, has decreased to its lowest point in more than three years, according to a recent report from Redfin. As of August 22, the margin was 2.26 percentage points, down from 2.68 a year earlier and roughly 2.5 at the beginning of the summer. Putting Fed policy aside means mortgage lenders are lowering rates, which is good news for homebuyers and homeowners wishing to refinance. In 2021, when mortgage rates were at all-time lows, the mortgage spread dropped to about 1.5 percentage points, which was lower than normal. Because mortgage rates rose, markets were more volatile, and lenders tried to hedge their risks by raising interest rates, it doubled in 2022 and 2023 to levels often observed during financial turbulence. The spread is already declining grad- ually, although it still has more space to drop before reaching more normal levels of 1.5–2 percentage points. This implies that mortgage rates have a greater chance of declining than treasury yields. "Think of the spread like a restau- rant meal," said Chen Zhao, Head of Economics Research at Redfin. "The treasury yield is the cost of raw ingredi- ents, the mortgage rate is the price of the meal on the table, and the spread is the restaurant's markup, which covers the cost of the chef, rent on the restaurant, profit margin, etc. Regardless of the cost of raw ingredients, if the restaurant has a lower markup, that lowers the customer's bill. Similarly, regardless of the Fed's actions, a lower mortgage spread helps lower mortgage rates." Declining Mortgage Rates Matter for Homebuyers Nationwide Per the report, lower mortgage rates are the result of a smaller mortgage spread. Mortgage rates may drop much further if the spread keeps getting smaller. Since many homes have been on the market for a long time, it's also important to keep in mind that it's a buyer's market and that many sellers are willing to ne- gotiate, even lowering their price. When paired with reduced interest rates, this could be a favorable moment to secure a reduced monthly housing payment. "It's important to note that if the Fed cuts interest rates as expected in Septem- ber—or more than expected—mortgage rates may fall more than anticipated because the spread is also falling," Zhao said. Since many homes have been on the market for a long time, it's also important to keep in mind that it's a buyer's market and that many sellers are willing to ne- gotiate, even lowering their price. When