Rate cuts this spring? Unlikely, given new jobs data
The latest employment report was mixed, but stronger wage growth means rate cuts will probably remain paused through the spring homebuying season.
A softer but still solid jobs report further reduces the chances of a rate cut by the Federal Reserve this spring.
Roughly 143,000 jobs were created in January, slightly below expectations, but monthly wage growth came in stronger than forecast at 0.5%. The unemployment rate also ticked down to 4%, according to the U.S. Bureau of Labor Statistics.
For now, that means the Fed has little incentive to cut short-term rates when it meets in March and is expected to continue with the cautious approach it has taken over the past two months.
"The Fed has emphasized the need for either 'real' inflation progress or 'some' labor market weakness before delivering additional rate cuts, and the January jobs report provided neither," said Sam Williamson, senior economist at First American, adding that rates cuts would likely remain "off the table until May/June at the earliest."
While not directly tied to mortgage rates, the continued pause in short-term interest rate cuts should keep the 30-year mortgage rate near 7% for the coming weeks. Other factors — such as pent-up demand — may help determine whether homebuyers will jump into the market even at current rates.
"With more jobs being added in relatively high-wage sectors, and overall earnings on the rise, prospective home buyers will feel more confident heading into the spring housing market," said Lisa Sturtevant, chief economist at Bright MLS — but she noted that elevated rates will still be challenging from an affordability perspective.
Inventory continues to build: Early 2025 housing data indicates there will be more choices this spring compared to recent years. Newly listed homes in January are up 10.8% compared to a year ago while homes actively for sale are up 24.6% year-over-year, according to Realtor.com's latest report.
The monthly report also found that homes are spending 73 days on the market on average, making this January the slowest since 2020, but also keeping inventory levels up heading into spring.
"While rates remain elevated, it is possible that we might be seeing that chiseling effect starting as sellers may grow tired of waiting for significant changes in rates," according to the report, authored by economists Danielle Hale and Sabrina Speianu.