Michigan Housing & Mortgage Market Update: December 2025 — What Buyers and Sellers Need to Know Right Now

When Theresa walked into National Mortgage Home Loans last week, she was visibly exhausted from information overload.

"I've been watching this market for an entire year. Back in January 2025, mortgage rates were around 6.8-7%, and everyone said they'd drop to 5.5% by year-end. I waited. Rates came down to 6.1% in October, so I got excited. But now in December they're back up to 6.7%, and I don't know what to believe anymore.

"I found a house I love in Canton for $295,000. I'm pre-approved. I have 20% down saved. But I feel like I'm on a rollercoaster—rates drop, I get ready to buy, then they spike again. Should I wait for rates to drop again? Should I jump now before they go higher? What if home prices finally start falling in 2026?

"I'm completely paralyzed. Can you just tell me what's actually happening RIGHT NOW in December 2025—not predictions, not maybe, just what's real?"

Theresa's exhaustion is what I'm hearing daily as we close out 2025: Buyers who've spent an entire year trying to time the market perfectly, only to realize that "perfect timing" never arrived—and they've watched another 12 months of equity-building pass them by.

Let me cut through an entire year's worth of confusion and give you the straight facts about where Michigan's housing market and mortgage rates actually stand as we head into 2026—what the data shows, what it means for you, and how to finally make a decision and stop waiting.

Mortgage Rates December 2025: The Year That Wasn't What Anyone Expected

Let's start with the number everyone's been obsessing over all year: What are mortgage rates RIGHT NOW in December 2025?

Current Rates (Week of December 10, 2025)

According to the latest data:

• 30-year fixed: 6.12-6.72% (depending on source and borrower qualifications)
• 15-year fixed: 5.44-5.81%
• FHA 30-year: 6.0-6.5%
• VA 30-year: 5.9-6.3%
• Refinance rates: 6.71% (30-year), 5.81% (15-year)

The 2025 rate story in three acts:

Act 1 (January-March 2025): Rates started the year at 6.8-7.0%, with widespread predictions they'd fall to 5.5-6% by year-end.

Act 2 (April-October 2025): The Fed cut rates in September and October (25 basis points each time). Mortgage rates gradually declined, hitting their 2025 low of around 6.1-6.2% in late October.

Act 3 (November-December 2025): Rates bounced back up to 6.5-6.7% range despite additional Fed cuts, disappointing borrowers who thought rates would keep falling.

The pattern: Mortgage rates dropped ahead of Fed cuts (in anticipation), then reversed course after the cuts actually happened. This confused millions of borrowers who expected rates to keep falling throughout the year.

What Happened to All Those "Rates Will Be 5.5%" Predictions?

At the start of 2025, virtually every forecast predicted mortgage rates would end the year between 5.9-6.3%. Here's what actually happened:

Fannie Mae forecast (January 2025): 6.4% average for 2025
Actual outcome: 6.5-6.7% currently (slightly higher than predicted)

Why the forecasts were wrong:

1. Inflation remained stickier than expected — Core inflation didn't cooperate with Fed hopes
2. Economic growth stayed strong — Strong economy = less need for dramatic rate cuts
3. Bond market uncertainty — Treasury yields stayed elevated despite Fed cuts
4. Political uncertainty — concerns about President Donald Trump's economic agenda, including tariffs and tax cuts, created volatility

The lesson: No one—not Fannie Mae, not the MBA, not the Fed itself—can accurately predict mortgage rates 12 months out. Anyone who waited all of 2025 for rates to hit 5.5% is still waiting.

The 2026 Outlook: More Modest Expectations

After a year of overly optimistic predictions, forecasters have adjusted expectations for 2026:

Fannie Mae forecast (November 2025): Mortgage rates will end 2026 at 5.9%, declining marginally throughout the year, with rates dipping below 6% at the end of 2026

Wells Fargo forecast: 30-year fixed mortgage rates will average 6.23% in 2026 and 6.3% in 2027

Translation: Expect gradual, modest improvements through 2026—not dramatic drops. Rates may dip below 6% by late 2026, but we're not returning to 4-5% rates anytime soon.

Realistically: Plan for rates to remain in the 6-6.5% range through most of 2026, with possibility of dropping to high-5% range by year-end.

What This Means for Theresa (And You)

If Theresa waits another 12 months hoping for rates to drop to 5.5%:

Best case scenario (rates drop to 5.8% by December 2026):

• Her $295,000 home appreciates 3.5%: $305,325
• She pays 12 months rent: ~$21,600
• House costs $10,325 more
• Monthly payment at 5.8% on $244,260 loan: $1,428
• vs. buying now at 6.7% on $236,000 loan: $1,530
• She saves $102/month but spent $21,600 on rent and the house costs $10,325 more
• Total cost of waiting: $31,925 to save $102/month

Realistic scenario (rates stay 6.3-6.5% through 2026):

• House appreciates to $305,325
• Paid $21,600 in rent
• Monthly payment is about the same or higher
• Total cost of waiting: $32,000+ with NO rate benefit

Theresa's been waiting since January 2025. She's already paid $21,600 in rent while home prices rose 3-5%. Waiting another year compounds this mistake.

Michigan Housing Market December 2025: The Numbers

Now let's look at what actually happened in Michigan's housing market throughout 2025.

Home Prices: Steady Growth Continues

Michigan home prices (current data - October/November 2025):

• Statewide median: $273,900 median price in October 2025
• Year-over-year increase: up 4.2% compared to last year
• Metro Detroit median: $253,333
• Detroit proper: $94,500-$102,000 (surged 18% in 2024, moderating in 2025)

Alternative sources show:

• Median home price approximately $269,667, a 4.7% increase from 2024
• 8.3% annual price growth in January 2025 (earlier in year, growth has moderated since)

Key insight: Despite everyone waiting for price drops, Michigan home prices rose another 4-5% in 2025. The "crash" never came, and people who waited all year paid 4-5% more for the same houses.

Why prices kept rising in 2025:

1. The lock-in effect intensified — More homeowners stuck with 3-4% rates from 2020-2021
2. No foreclosure wave — Strong economy = low defaults
3. Inventory stayed tight — Despite improvements, still well below balanced market
4. Demographic demand — Millennials, Gen Z, downsizing boomers all competing

Inventory: Improving But Still Tight

Current Michigan inventory (October 2025):

• Homes for sale: 42,182 homes for sale in Michigan, up 8.2% year over year
• New listings: 13,108 and up 4.0% year over year
• Months of supply: 3 months
• Michigan is inching toward a more balanced housing market, with 3–5 months of inventory in many areas

What this means:

• Under 5 months of supply = still seller's market
• Improvement from 2-2.5 months in 2021-2023, but not yet balanced
• Fewer than 40,000 homes available statewide means buyers face steep competition for anything appealing

The 2025 inventory story: Inventory did improve throughout 2025—up 8-17% depending on region and timeframe. But the improvement wasn't dramatic enough to shift market balance. Sellers still have leverage.

Days on Market: Homes Still Selling Reasonably Fast

Average days on market: 34 days median, up 4 days year over year

This represents a slowdown from the 7-14 day madness of 2021-2022, but it's still faster than the 45-60+ days typical of a balanced market.

Translation: Good homes in good condition still move in 4-5 weeks. Not instant, but not lingering.

Competition: Still Competitive But More Negotiable

Current Michigan data:

• 27.9% of homes in Michigan sold above list price, down 2.9 points year over year
• 34.9% of homes had price drops, up from 31.0% of homes in October last year
• 97.8% sale-to-list price ratio, down 0.53 points year over year

What this tells us:

• Nearly 1 in 3 homes still sells above asking (still competitive)
• But 1 in 3 homes also has price reductions (more negotiating room)
• Buyers have more room to negotiate, but move-in-ready homes in desirable areas still sell fast

The 2025 buyer experience: Much better than 2021-2022 (no bidding wars with 20 offers), but not a true buyer's market. You can negotiate on overpriced or rough-condition properties, but you still need to move fast on the good stuff.

Regional Variations Within Michigan

Hot growth areas in 2025:

• Lyon Township/Green Oak Township (Oakland/Livingston counties)
• Metro Detroit climbing fast, Wayne, Oakland, and Macomb counties jumped more than 10% in 2024
• Southwest Michigan prices surged 17% year-over-year as of April 2025
• Grand Rapids area (moderating from peak but still growing)

Cooling areas:

• Northern Michigan cooling off from red-hot lakefront growth (Traverse City, Petoskey)
• Still strong, but 2021-2022 vacation home frenzy has normalized

Affordable areas:

• Detroit proper: Still around $94,500-$102,000 median, though some neighborhoods up 18-40%+
• Upper Peninsula: Relatively cheap but limited inventory and amenities

What 2025 Taught Us: The Lessons from a Year of Waiting

Let's be brutally honest about what actually happened in 2025:

Lesson #1: "Waiting for Lower Rates" Cost People Thousands

January 2025 scenario:

• Average Michigan home: $260,000
• Mortgage rate: 6.8%
• Monthly payment (20% down): $1,390

December 2025 reality:

• Same home now costs: $270,000 (4% appreciation)
• Mortgage rate: 6.7% (barely lower)
• Monthly payment (20% down): $1,395
• Plus 12 months of rent: ~$21,600

People who waited paid $10,000 more for the house, $21,600 in rent, and their monthly payment is virtually identical.

Lesson #2: Rate Predictions Are Consistently Wrong

Every major forecaster predicted rates would be lower by now than they actually are. The lesson: stop making decisions based on rate predictions.

Lesson #3: The "Lock-In Effect" Isn't Going Anywhere

More than 80% of homeowners are locked into rates below 6% as of Q4 2024. This inventory constraint will persist for years, not months.

Lesson #4: Home Prices Don't Drop Just Because Rates Are High

The theory: "High rates will crash home prices."
The reality: Michigan home prices rose 4-5% in 2025 despite rates staying elevated.

Supply and demand matter more than rates.

Lesson #5: Perfect Market Timing Is Impossible

Theresa tried to time the market perfectly for 12 months. She failed—not because she's not smart, but because perfect timing is impossible for anyone.

What This Market Means for Buyers in December 2025

If you're trying to buy in Michigan right now as we close out 2025:

The Good News

✅ Rates are off their 2023-2024 peaks — 6.1-6.7% is better than 7-8%

✅ Inventory improved 8-17% in 2025 — More options than last year

✅ Winter buying season — Less competition now than spring/summer

✅ More negotiating room — 34.9% of homes have price drops

✅ No 2021-style bidding wars — Competition is real but manageable

✅ Refinance applications have surged as rates have been dropping — Buy now, refinance strategy is working

The Challenges

❌ Still a seller's market — 3 months of supply gives sellers leverage

❌ Good homes still competitive — 28% selling above asking

❌ Rates may not drop dramatically in 2026 — Manage expectations

❌ The income needed to qualify for a median-priced home exceeded $104,000 per year as of April 2025 — Affordability remains challenging

❌ Prices rose 4-5% in 2025 — Waiting didn't save money

The Math: Theresa's Canton Home

Theresa's target home: $295,000 in Canton

Buying now (December 2025):

• Purchase price: $295,000
• Down payment (20%): $59,000
• Loan amount: $236,000
• Rate: 6.7%
• Monthly P&I payment: $1,530
• Total with taxes/insurance: ~$2,200

If she waits 12 more months hoping for 5.8% rates:

Scenario A: Rates drop to 5.8% (optimistic)

• Home price (3.5% appreciation): $305,325
• Loan amount: $244,260
• Rate: 5.8%
• Monthly P&I: $1,428
• Saves $102/month
• But paid $10,325 more for house + $21,600 in rent
• Cost of waiting: $31,925 to save $102/month
• Break-even: 313 months (26 years)

Scenario B: Rates stay 6.5% (realistic)

• Home price: $305,325
• Rate: 6.5%
• Monthly payment: $1,542
• Pays $12/month MORE despite waiting
• Plus $10,325 more for house + $21,600 rent
• Total cost of waiting: $32,000+ for HIGHER payment

Theresa's decision: Buy now. She's done waiting.

What This Market Means for Sellers in December 2025

If you're considering selling as we end 2025:

The Good News

✅ Still a seller's market — 3 months supply = leverage

✅ Prices rose 4-5% in 2025 — Your home is worth more than last year

✅ 28% of homes sell above asking — Well-priced properties get competing offers

✅ Homes moving in 34 days — Reasonable timeline, not sitting forever

The Challenges

❌ 35% of homes have price drops — Overpricing doesn't work anymore

❌ Buyers more cautious — Higher rates = more payment-conscious buyers

❌ Condition matters more — Deferred maintenance = longer market time

❌ You're affected by lock-in too — Moving means trading 3% rate for 6.5%

2025 Seller Trends That Matter

What worked in 2025:

• Aggressive pricing from day one (priced $5-10K below comps = multiple offers)
• Updated, move-in-ready condition
• Professional photos and staging
• Willingness to negotiate on inspection items

What didn't work:

• Testing the market with high prices
• "Someone will pay for the potential" mentality
• Ignoring deferred maintenance
• Refusing to budge on price when market feedback is clear

The Lock-In Effect: Still the Defining Force

The single biggest factor shaping Michigan's market in 2025—and likely through 2026-2027:

The numbers:

• More than 80% of homeowners are locked into rates below 6%
• Moving means trading 3-4% mortgage for 6.5-7%
• Monthly payment impact: $800-$1,500/month increase

Example:

• Current home: $280,000 mortgage at 3.5% = $1,256/month
• New home: $380,000 mortgage at 6.7% = $2,464/month
• Difference: $1,208/month ($14,496/year)

Most families can't or won't absorb a $14,500/year housing cost increase, so they stay put.

This creates the cycle:

• Low inventory → High prices → Can't afford to move → Stay put → Low inventory continues

When will this break?

Not in 2026. Probably not fully until 2028-2030, when:

• Life events force moves (job changes, family changes, deaths, divorces)
• Rates normalize closer to 5-5.5% (making the move-up cost less painful)
• New buyers at 6-7% rates become the next generation of sellers

What Theresa Decided (After a Year of Paralysis)

After 12 months of watching, waiting, and trying to time the market perfectly, here's Theresa's final decision:

"I'm done. I'm buying the house. Here's why I finally stopped waiting:

1. I wasted an entire year

• Paid $21,600 in rent (January-December 2025)
• The house I wanted in January for $280,000 now costs $295,000
• Rates barely changed (6.8% → 6.7%)
• I accomplished nothing by waiting except making myself poorer

2. 2026 won't be dramatically different

• Forecasts say rates might hit 5.9-6.2% by end of 2026
• That's maybe 0.5% improvement (saves ~$65/month on my loan)
• Home prices will rise another 3-4% (costing me $10,000+)
• I'll pay another $21,600 in rent
• Waiting another year costs $31,600 to save $65/month

3. I can refinance if rates drop

• If rates hit 5.5% in 2027, I'll refinance
• I'll recoup closing costs through savings within 18-24 months
• I'm not locked into 6.7% forever

4. I plan to stay 10+ years

• This house works for my family long-term
• Short-term rate fluctuations don't matter for a 10-year+ hold
• Building equity beats paying rent every single month

5. Life is passing me by

• I spent 2025 in a rental, waiting for perfect conditions
• Perfect conditions never came
• I could've been building equity, making my house my own, living my life
• I'm done sacrificing my life to chase perfect market timing

I'm buying the house at 6.7%, and I'm getting on with my life."

Theresa closed three weeks later. Her payment is $400 more than her rent was, but she owns her home and she's finally stopped the analysis paralysis that cost her an entire year.

2026 Predictions: Modest Improvement, Not Transformation

Based on current forecasts and trends, here's what to expect in 2026:

Mortgage Rates 2026

Consensus forecast:

• Q1 2026: 6.3-6.7%
• Q2 2026: 6.1-6.5%
• Q3 2026: 5.9-6.3%
• Q4 2026: 5.8-6.1%

Translation: Gradual drift downward, potentially dipping below 6% by late 2026, but no dramatic drops.

Michigan Home Prices 2026

Expected appreciation: 2-4% year-over-year

Slower than 2025's 4-5%, but still positive growth. No crash coming.

Inventory 2026

Expected change: Continued modest improvement, up another 5-10%

Still not enough to shift to buyer's market, but more options than 2025.

Market Balance 2026

Prediction: Continued slow shift toward balance

Michigan will remain technically a seller's market through most of 2026, but seller leverage will continue eroding slightly. By late 2026 or early 2027, some areas may hit true balance.

The Bottom Line: Stop Waiting, Start Living

Here's what 2025 taught us:

❌ Waiting for perfect conditions cost buyers thousands
❌ Rate predictions are consistently wrong
❌ Home prices don't drop just because rates are high
❌ Perfect market timing is impossible
❌ Analysis paralysis is expensive

Here's what we know heading into 2026:

✅ Rates will likely improve modestly (maybe 0.5% by year-end)
✅ Home prices will probably rise another 2-4%
✅ Inventory will improve slightly but stay tight
✅ The lock-in effect will persist
✅ There will be no "perfect" moment

The decision framework:

Buy in early 2026 if:

• You found a house that meets your needs
• You can afford the payment at current rates
• You plan to stay 5+ years
• You're financially stable
• You're done waiting for perfect conditions

Wait if:

• You're stretching to afford the payment
• You might need to move in 1-3 years
• Your income/job is uncertain
• You haven't found the right house

Never decide based on:

• Predictions about 2026 rates
• Hopes for a price crash
• Trying to time the bottom perfectly
• What rates were in 2020-2021

How National Mortgage Home Loans Can Help End Your Analysis Paralysis

If you spent 2025 stuck in analysis paralysis like Theresa, we can help you finally make a decision and move forward.

At National Mortgage Home Loans, we provide:

✅ Honest market reality checks — No hype, no predictions, just current data
✅ Buy now, refinance later strategies — Position yourself to benefit from future rate drops
✅ Fast pre-approvals — Get positioned to act when you find the right house
✅ Multiple financing options — Conventional, FHA, VA, Non-QM, DSCR, and more
✅ Michigan market expertise — We understand regional variations and local trends
✅ Rate monitoring — We'll alert you if significant rate improvements create refinance opportunities

Contact National Mortgage Home Loans today:

• Visit www.nmhl.us
• Call us to finally get off the sidelines
• Get pre-approved so you're ready to act in early 2026

We speak your language: Hablamos español | نتحدث العربية (Arabic) | ܡܡܠܠܝܢܢ ܟܠܕܝܐ (Chaldean Aramaic) | ܡܡܠܠܝܢܢ ܐܬܘܪܝܐ (Assyrian) | Flasim shqip (Albanian)

Don't let 2026 become another year of waiting, watching, and paying rent while home prices rise. The market won't be perfect—it never is. But you can make smart decisions based on your personal situation instead of chasing perfect timing that never arrives.

"The best time to buy was 2020. The second best time was January 2025. The third best time is January 2026—before you waste another year waiting for conditions that may never come."