REAL ESTATE INSIGHTS
Harris Real Estate Daily
By Tim & Julie Harris · December 18, 2025
If you’ve been hearing “rates are stuck” or “buyers are frozen,” you’re hearing the headline version of the housing story — not the real one.
Under the hood, important changes are taking place that directly impact mortgage rates and buyer confidence heading into the spring market.
If you understand what’s happening now, you’ll be ahead of the agents waiting for permission from the headlines.
Mortgage Rates Are Driven by Bonds — Not Headlines
Mortgage rates are not set directly by the Fed.
They are driven primarily by the mortgage-backed securities (MBS) market.
When demand for MBS rises:
MBS prices increase
Yields fall
Mortgage rates tend to move lower
That’s why recent developments involving Fannie Mae and Freddie Mac matter so much.
What Fannie Mae and Freddie Mac Are Quietly Doing
According to a recent analysis from Real Investment Advice, Fannie Mae and Freddie Mac have been adding billions of dollars in mortgages and mortgage bonds to their balance sheets.
Why this matters:
When Fannie and Freddie buy and retain mortgages, they remove supply from the bond market
Reduced supply pushes bond prices higher
Higher prices mean lower yields
Lower yields typically translate into lower mortgage rates
In fact, their retained mortgage portfolios have grown dramatically — reaching levels not seen since before the financial crisis.
This is an important, under-reported development for housing.
Why This Can Lower Rates Without Fed Cuts
Many agents are waiting for the Fed to aggressively cut short-term rates.
But here’s the key insight:
Mortgage rates respond more to MBS spreads than to the Fed Funds Rate.
For much of the past year, mortgage rates stayed higher than expected because:
Mortgage spreads widened
Investors demanded extra yield to hold MBS
When large, reliable buyers like Fannie and Freddie absorb more of those bonds, spreads can tighten — even if the Fed moves slowly.
That’s how mortgage rates can ease before headline-grabbing rate cuts.
HousingWire’s “Goldilocks” Housing Scenario
HousingWire analyst Mike Simonsen has described the current market as a “Goldilocks” setup — not too hot, not too cold.
Here’s what that means for agents:
🔹 Demand is suppressed, not destroyed
Many buyers are waiting on rate clarity, not price crashes.
🔹 Inventory remains constrained
Listings are not flooding the market, which supports pricing.
🔹 Rates don’t need to collapse
They simply need to stabilize and trend modestly lower to bring buyers back.
Historically, buyer activity increases before rates hit their lowest point — once confidence returns.
What This Means for the Spring Market
Spring markets don’t require perfect conditions — they require directional confidence.
If mortgage rates:
Become more predictable
Drift lower or stabilize
Stop spiking on every headline
Buyer psychology changes quickly.
When buyers feel the worst is behind them, they act.
What Smart Agents Are Doing Right Now
Top agents are not waiting for the news to turn optimistic.
They are:
✅ Re-engaging paused buyers
Explaining how MBS demand impacts rates and why waiting can be costly.
✅ Educating sellers early
Helping them understand why buyer activity may improve as rates stabilize.
✅ Positioning themselves as the calm expert
Replacing fear-based narratives with clear, data-driven explanations.
Remember: fear sells clicks — clarity sells homes.
The Bottom Line for Agents
Rates don’t need to crash.
The Fed doesn’t need to rush.
Inventory doesn’t need to surge.
We simply need:
Improved MBS demand
Tighter mortgage spreads
Growing buyer confidence
Those conditions are beginning to form.
This is not a market to sit out.
It’s a market to prepare for, explain clearly, and lead through.
Agents who understand what’s happening before the headlines shift are the ones who will dominate the spring market.
Written by Tim & Julie Harris
— Real Estate Coaches & eXp Partners
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