The Impact of December 2025 Mortgage Refi Rates on Housing Market Liquidity and REIT Performance

As we approach the end of 2025, the housing market and real estate investment trusts (REITs) are at a pivotal juncture. Mortgage refinance rates, a critical barometer for both residential and commercial real estate activity, are trending toward stabilization-and in some cases, decline. This shift has profound implications for housing market liquidity and REIT performance, particularly as investors recalibrate strategies in anticipation of the Federal Reserve's projected rate-cutting cycle in 2026.

The Mortgage Rate Landscape: Stability and Subtle Optimism

As of November 26, 2025, the 30-year fixed-rate mortgage averaged 6.23%, while the 15-year fixed-rate mortgage averaged 5.51% according to Freddie Mac data. By early December, these rates exhibited minor fluctuations, with Zillow reporting a 30-year rate of 6.27% on December 1, 2025, and Bankrate noting a 6.28% rate on December 3. Freddie Mac's data, meanwhile, underscored a 6.23% average for the 30-year rate, suggesting a market in slight but meaningful consolidation.

Experts project that December 2025 rates will remain in the low-to-mid 6% range, with a consensus leaning toward a 6.3% average by year-end. Short-term volatility is expected, driven by economic data releases and Federal Reserve decisions, though analysts like Danielle Hale of Realtor.com anticipate rates hovering near 6.25%. This stability, coupled with the Fed's anticipated rate cuts in 2026, signals a potential inflection point for affordability and market participation.

Housing Market Liquidity: A Slow but Steady Thaw

The housing market's liquidity profile is gradually improving. Inventory levels have stabilized after years of rapid appreciation, while home prices have stabilized after years of rapid appreciation. Lower mortgage rates-projected to trend downward in early 2026-will further ease affordability pressures, encouraging refinancing activity and first-time homebuyer entry.

For instance, Freddie Mac's data highlights that even a marginal decline in rates (e.g., from 6.23% to 6.0%) could unlock significant refinancing demand, reducing monthly payments and increasing disposable income for homeowners. This dynamic not only boosts consumer confidence but also enhances housing market turnover, creating a more liquid environment for buyers and sellers alike.

REIT Performance: A Tailwind from Lower Borrowing Costs

The Federal Reserve's rate-cutting trajectory-projected to bring policy rates to 3.25%-3.5% by late 2026-is a tailwind for REITs. Historically, lower interest rates have supported REIT valuations by reducing borrowing costs and increasing the present value of future cash flows. In December 2025, this trend is already manifesting in commercial real estate, with sectors like office and retail experiencing cap rate compression as investors seek yield in a low-rate environment.

Moreover, the stabilization of residential mortgage rates is indirectly beneficial. As housing demand recovers, so too does the rental market, bolstering equity REITs that own multifamily properties. For instance, Cushman & Wakefield's analysis notes that industrial, data center, and healthcare real estate-sectors with lower correlation to residential markets-remain particularly attractive due to structural demand drivers.

Strategic Real Estate Investment Timing: Positioning for 2026

Investors must consider two key factors when timing real estate investments in this environment: refinancing opportunities and sector-specific demand.

1. Refinancing as a Catalyst for Liquidity: With mortgage rates expected to dip further in early 2026, refinancing activity will likely surge. This creates opportunities for REITs and commercial lenders to capitalize on increased loan origination volumes and improved borrower credit profiles. For individual investors, refinancing can free up capital for reinvestment in higher-yield assets.

2. Sector Selection: Sectors insulated from residential market volatility-such as industrial (driven by e-commerce growth), data centers (fueled by AI and cloud computing), and healthcare (supported by demographic trends)-offer asymmetric risk-reward profiles. These sectors are also better positioned to benefit from lower cap rates and improved financing conditions according to market analysis.

Conclusion: A Window of Opportunity

December 2025 marks a transitional phase for real estate markets. While mortgage rates remain elevated compared to pre-2022 levels, their projected decline in early 2026-coupled with Fed rate cuts-creates a favorable backdrop for both housing market liquidity and REIT performance. Strategic investors who position themselves in sectors with structural demand and leverage refinancing tailwinds will be well-placed to capitalize on the coming year's opportunities.