Housing Market Update | Week of March 24

Although the Federal Reserve opted to leave rates unchanged, as was expected, mortgage rates and the 10-year both dropped slightly following Fed Chair Jerome Powell's post-meeting press conference on Wednesday afternoon. Powell's press conference covered a wide range of economic topics including inflation concerns, the potential impact of tariffs, and the future of the labor market. Central to each of his answers regarding those three conditions was the overall economic uncertainty the country faces right now. This uncertainty has been what's driven bonds and mortgage rates lower in the last month. This week will give us more insight into the Fed’s short- to medium-term plan as multiple Fed Presidents speak to the media throughout the week. We also have our PCE inflation report—which is the Fed’s favorite measure of inflation—on Friday which could spark some bond market activity heading into the weekend. Last Week's Mortgage Rate Recap Rates Inched Lower The Fed kept rates steady during its March Meeting but laid the roadmap to lower mortgage rates with its updated Summary of Economic Projections (SEP). Since mortgage rates have dropped in the last month, purchase applications have been positive year-over-year. If rates do continue to drop closer to 6%, we should see housing market activity ramp up significantly. To get there, we will need to see the unemployment rate rise and inflation hold steady. The Fed’s SEP for 2025 showed just that, with unemployment projected to rise to 4.3% and between 2-3 cuts to the Fed Funds Rate. For now, we’ll have to wait for the data to come in. But the underlying housing market data shows that people are eager to buy homes, and that demand will only increase if rates can drop to 6%. This Week's Mortgage Rate Forecast Rates Could Drop Slightly We have plenty of economic data on the horizon with the potential to continue to shake up mortgage rates. There are plenty of speeches coming this week from Fed Presidents that will shed more light on their attitude towards tariffs, the labor market, and potential rate cuts as soon as May. As always, their rhetoric can often impact rates as much as their actions do. A big talking point in Powell's press conference was the impact of tariffs on the economy. The Trump administration is currently set to enact reciprocal tariffs next Wednesday, April 2nd. As more details about these tariffs surface, we could see bond market activity move in either direction. Check out this blog to learn more about how tariffs could impact mortgage rates and housing affordability. Thursday's weekly jobless claims report will be another thing to keep an eye on. After a sharp drop in late February, we saw initial jobless claims increase last week. Finally, we will cap the week with our PCE inflation report. The markets currently anticipate Core PCE rising from 2.6% to 2.7% year-over-year, but some underlying data suggests it might stay pat at 2.6%. If this does happen, we could see the bond market rally by the end of the week.

Last week was a wild one for mortgage rates. Although the Federal Reserve announced that they would not be cutting the Federal Funds rate in their May meeting, they did announce that they are tapering their balance sheet reduction. This, combined with weak labor data sprinkled at the end of the week, saw mortgage rates drop at the end of the week. Last Week's Rate Recap: Rates Dropped Slightly Last week, the Federal Reserve held its May meeting. While they decided against cutting rates, Jerome Powell, Fed Chairman, held a dovish stance on the possibility of rate cuts in the future. Last week’s labor reports also showed a softening in the jobs market which caused rates to drop quickly at the end of the week. While it’s still unlikely that we see a rate cut in the Fed’s next meeting, a weakened labor market will be the key to seeing rates drop as the year goes on. This Week's Rate Forecast: Rates Should Stay Steady After the flurry of data and insight from last week’s jobs reports and the Federal Reserve meeting, we have a quieter week ahead without much data for the market to digest. Following a steep drop to the 10-year yield at the end of the week, market analysts will have a careful approach to instill some stability throughout the week. Overall, we should expect to see some steadiness throughout the week. If you want a more comprehensive overview of the market’s reaction to the Federal Reserve meeting and labor data last week, check out a replay of today’s Special-Edition Monday Market Update. Our two hosts offered plenty of insight behind these rate movements and some tactical advice to help you use these pieces of market data to better serve our homebuyers.