Falling rates ‘a strong incentive’ for buyers to act 

Mortgage rates have fallen for a seventh straight week — will that be enough to kickstart home sales, or will other factors keep buyers sidelined? Those are some of the big questions on the minds of housing economists as the spring homebuying season gets underway. 

The 30-year fixed-rate mortgage averaged 6.63% this week, according to Freddie Mac, down significantly from last week's average of 6.76% and the largest weekly decline since September, noted Sam Khater, Freddie Mac's Chief Economist. For buyers, that "should provide a strong incentive to make a move," Khater said. 

That's because buyers could now save around $100 on their monthly mortgage compared to January, when rates topped 7%, said Bright MLS Chief Economist Lisa Sturtevant. Affordability is still a concern as home prices continue to rise, but perception goes a long way, and lower rates could "provide buyers with the psychological comfort they are looking for to get into the market," Sturtevant said.

Economic uncertainty could drive rates up … or down

While "lower rates will spur on the housing market," according to Realtor.com Senior Economist Joel Berner, he added that rates could remain elevated due to "stubbornly high" inflation "which will not be helped by the tariffs that the Trump administration appears committed to rolling out." Those tariffs are likely to affect the homebuilding industry and push up the cost of everyday consumer goods. Higher prices, in turn, impact investor sentiment, Berner said, which can cause rates to rise.

But the uncertainty surrounding tariffs and other economic policies can also drive investors toward the safety of bond purchases, said Samir Dedhia, CEO of One Real Mortgage — and that could pull rates down further. The current economic turbulence has also "fueled expectations that the Federal Reserve will cut the Fed Funds Rate by 75 basis points this year, a notable shift from earlier projections," Dedhia said. Analysts previously forecast cuts totaling 50 basis points, with some saying the Fed might not cut rates at all in 2025. 

Given these broader economic unknowns, buyers should expect mortgage rate volatility and "be prepared to act quickly if they see rates dip because they could easily come back up," cautioned Sturtevant. 

Mortgage applications rise

Some buyers already appear to be acting quickly. The Mortgage Bankers Association reported that purchase applications rose 9% last week compared to the week prior, and while some of that is due to seasonality, applications were up slightly compared to this time last year, noted Joel Kan, MBA's VP and deputy chief economist. "These are more green shoots as we head into the spring homebuying season," Kan said.

Refinance applications posted an even bigger bump, increasing 37%. That's the fastest pace since October, Kan said. 

Sales continue to lag

Despite the bump in mortgage applications and lower borrowing costs, many buyers are continuing to hold out. Pending sales were down 6.4% at the beginning of March, according to Redfin's latest weekly housing report. That's consistent with the most recent NAR data, which found that the Pending Home Sales Index fell to an all-time low in January — an indication of fewer closed transactions this spring.

Redfin attributes the slow pace of sales to the combination of high home prices and economic uncertainty. That $100 improvement in monthly mortgage payments? It's a different story when looking at changes in borrowing costs over the past year: Redfin found that today's buyers can expect to pay 5.3% more each month compared to a year ago.

That may be one reason demand has fallen slightly year-over-year, as measured by Redfin's Homebuyer Demand Index. But touring activity has increased since the beginning of 2025, following expected seasonal patterns, and inventory continues to edge up.

While agents might not yet be seeing the sales bump they hoped for this year, the spring shopping season is just getting started.