Mortgage Rates Decline Amid Tariff Uncertainty: What It Means for Homebuyers
On Thursday, mortgage rates experienced a significant decrease following the announcement of tariffs by the Trump administration. According to Mortgage News Daily, the average rate for a 30-year fixed mortgage dropped by 12 basis points, landing at 6.63%, the lowest since October. This decline in rates has come as a response to the turmoil in the stock market, which prompted many investors to turn to the bond market. As a result, bond yields fell, aligning closely with movements in mortgage rates, which typically follow the trends of the 10-year U.S. Treasury yield.
Despite the drop in rates, much uncertainty still surrounds the specifics of the tariff announcement, prompting market analysts to prepare for potential impacts on global trade dynamics. "While plenty of uncertainty remains over the finer points of Wednesday afternoon’s tariff announcement, markets have heard enough to brace for impact on global trade," noted Matthew Graham, the chief operating officer at Mortgage News Daily.
This rate cut coincides with the beginning of the prime homebuying season in spring, but buyers are contending with several challenges that are exacerbating housing affordability issues. For example, data from Redfin, a well-known real estate brokerage, indicates that the average monthly payment for homebuyers reached a staggering $2,802, hitting a record high for two consecutive weeks. Sale prices have also risen by 3.4% year-over-year. Although mortgage rates are near their lowest point since December, they remain more than double the lows seen during the pandemic, causing significant strain on buyers’ budgets.
Currently, about 70% of households in the U.S., which translates to approximately 94 million individuals, find it difficult to afford a home priced at $400,000. Reports from the National Association of Home Builders project that by 2025, the estimated median price of new homes could reach around $460,000, creating hurdles for many buyers.
To put things into context, the required income to purchase a $200,000 home at a mortgage rate of 6.5% is approximately $61,487. In 2025, nearly 52.87 million American households are forecasted to have incomes below this threshold, restricting their home purchase capabilities to properties valued at $200,000 or lower.
Despite an increasing number of homes being listed on the market, the available inventory is primarily not aligned with buyer demand, particularly in the lower price segments. Home supply is significantly reduced compared to historical standards, a byproduct of chronic underbuilding that has persisted since the Great Recession.
"There’s an uptick in supply; many people I’ve spoken with recently are considering listing their homes," shared Matt Ferris, a Redfin agent in Northern Virginia. He explained that some sellers anticipate reaching the peak of the market and wish to sell at maximum value while others are motivated by career-related concerns, such as potential job security issues or a desire to move closer to urban areas due to changing office policies.
The month of March has seen an increase of 10% in new listings compared to the previous year, with active listings rising approximately 28% year-over-year, as reported by Realtor.com. However, homes are taking longer to sell, and an increasing number of properties are experiencing price reductions. Meanwhile, pending sales—contracts signed on existing homes—have decreased by 5.2% from last March in major metropolitan areas across the nation.
Some cities are witnessing particularly steep downturns. For instance, Jacksonville, Florida, experienced a 15.1% decline, with Miami trailing closely behind at a 13.7% drop. These declines can partly be attributed to a reversal of pandemic-induced migration trends. Virginia Beach has also seen a notable decrease of 14.2%.
"The high costs associated with purchasing a home, combined with escalating economic concerns, indicate a lackluster response from buyers in the early weeks of spring. We’re observing a market rebalancing that is providing shoppers with more options," explained Danielle Hale, chief economist for Realtor.com. She added that if recent improvements in mortgage rates continue, the later spring and early summer housing market might see more activity, provided that economic uncertainties do not derail potential homebuyers.
