The housing market is improving, but buyers are anxious
While they're showing more interest, economic volatility and uncertainty about the future could keep buyers from pulling the trigger on a home purchase.
Key points:
- The 30-year fixed-rate mortgage was up slightly this week, but it continues to hover around levels last seen in December.
- An increase in home tours and searches point to rising demand, but that hasn’t yet translated into pending sales.
- Would-be buyers may decide to hit pause as a plunging stock market and recession fears raise concerns about their financial future.
Housing market data continues to point toward better days for homebuyers, but uncertainty about the future could keep them sidelined.
Mortgage rates averaged 6.65% this week according to Freddie's Mac's latest survey — a slight increase from last week's 6.63% — but 30-year rates are still hovering around the lowest levels since December despite recent stock market volatility. And that should come as encouraging news for prospective buyers.
"The combination of modestly lower mortgage rates and improving inventory is a positive sign for homebuyers in this critical spring homebuying season," said Sam Khater, Freddie Mac's chief economist.
Recession fears may outweigh lower rates
Still, even as home tours have picked up, that hasn't translated to more home sale contracts, according to Redfin's latest market report, which found that pending sales were down 6.1% year-over-year.
"Lower mortgage rates have brought some house hunters who were waiting for costs to come down off the sidelines," said Redfin Economic Research Lead Chen Zhao. "But they haven't yet led to more sales because prospective buyers are still figuring out whether lower payments are enough to justify a home purchase in today's uncertain economy. Many Americans are concerned about things like job security and a potential recession."
Easing inflation could be short-lived
Unless the economy weakens considerably, mortgage rates aren't expected to fall much further. This week's Consumer Price Index report showed some easing of inflation in February, but it's not expected to be enough to prompt the Federal Reserve to lower interest rates when it meets later this month. Because the CPI report was based on data from February — before the Trump administration's back-and-forth on tariffs — the easing of inflation is expected to be short-lived.
With tariffs being announced, rescinded and reinstated, it's not yet clear how those policies will impact inflation. "Tariffs that do make their way onto the books will add to inflation, but we may not see their effect in the CPI for several months," said Realtor.com Sr. Economist Joel Berner.
Stock market tumble raises concerns
The turmoil in the stock market could lead some buyers to put a home purchase on hold. The Dow Jones Industrial Average fell 1.3% on Mar. 13 and is down by more than 9% since December as investors remain concerned about the effects of federal policies on inflation and a possible recession.
"The recent nosedive in the stock market could slow down the housing market even further, as prospective buyers are watching some of their wealth that they might be using for a down payment on a new home evaporate," said Berner.
Mortgage applications, demand indicators are up
While pending sales remain sluggish, mortgage applications are picking up steam, according to the Mortgage Bankers Association. Weekly applications were up 11.2% compared to the week before, largely driven by refinance applications. But purchase applications rose a solid 8% and were up 4% compared to a year ago.
Inventory also continues to rise, with Redfin reporting a 3.1% increase in new listings year-over-year. And the demand is there, according to Redfin's Homebuyer Demand Index, which is up 5% compared to a year ago, while Google searches of "homes for sale" are up 10%.
Whether that will lead to more sales remains to be seen.