Mortgage rates experienced a significant decline on Thursday, following the announcement of new tariffs by the Trump administration.
The average rate for a 30-year fixed mortgage dropped 12 basis points to 6.63%, marking its lowest point since October, as reported by Mortgage News Daily.
This drop in rates coincided with a tumultuous sell-off in the stock market on Thursday, prompting investors to shift their focus to bonds. Consequently, bond yields decreased, with mortgage rates typically aligning with the yield on the 10-year U.S. Treasury. These rates have remained within a narrow range since late February.
Matthew Graham, the chief operating officer at Mortgage News Daily, remarked, “While plenty of uncertainty remains over the finer points of Wednesday’s tariff announcement, markets have heard enough to brace for impact on global trade.”
The timing of the decrease in mortgage rates is fortuitous for the housing market, which is entering its traditionally busy spring season. Nevertheless, various factors continue to hinder buyers and negatively impact housing affordability.
In the four weeks leading up to March 30, the average monthly payment for U.S. homebuyers reached $2,802, setting a record for the second consecutive week, according to data from Redfin, a real estate brokerage.
The report further indicated that sale prices increased by 3.4% year-over-year, with the weekly average mortgage rate recorded at 6.65%, close to its lowest level since December but significantly higher than pandemic-era lows.
Despite the slight dip in mortgage rates, approximately 70% of households, or 94 million people, lack the financial means to purchase a home priced at $400,000. Projections suggest that the median price for a new home could rise to around $460,000 by 2025, as estimated by the National Association of Home Builders based on income thresholds and underwriting standards.
To buy a $200,000 home with a mortgage rate of 6.5%, a household income of at least $61,487 is necessary, as stated in the report. By 2025, an estimated 52.87 million U.S. households may have incomes that do not exceed that threshold, limiting them to homes priced at $200,000 or less.
While the supply of homes entering the market is increasing, these properties are not meeting the demand at more affordable price points. Overall, the inventory is still considerably lower than historical norms due to ongoing underbuilding trends since the Great Recession.
Matt Ferris, a Redfin agent in northern Virginia, noted, “Supply is picking up; many individuals I’ve spoken with over the last year or two are ready to list their homes.” He added that some sellers believe that we are at the peak of the market and wish to capitalize by securing top dollar for their properties. In the D.C. area, some homeowners are motivated to sell due to concerns over potential job losses in government positions or a desire to relocate closer to the city in response to in-office policies.
This spring season has shown signs of promising activity, with March reporting a 10% annual increase in new listings and approximately a 28% year-over-year rise in active listings, according to Realtor.com. However, the study also revealed homes are taking longer to sell, and the proportion of listings with price reductions is increasing. Pending sales, signifying contracts on existing homes, fell by 5.2% compared to last March in major metropolitan areas across the nation.
Significant declines in sales were recorded in Jacksonville, Florida, and Miami, Florida, where pending sales plummeted by 15.1% and 13.7%, respectively, attributed partly to reverse pandemic migration trends. Virginia Beach, Virginia, experienced a 14.2% decline.
Danielle Hale, chief economist for Realtor.com, explained, “The high cost of buying combined with escalating economic concerns suggests a sluggish response from buyers as spring progresses. We are witnessing a rebalancing market that offers more choices for shoppers.” She expressed optimism about recent improvements in mortgage rates potentially benefiting the later spring and early summer housing season, provided that economic uncertainties do not deter prospective buyers.
