Housing market watchers say improving home affordability and inventory levels are short-term positives for home shoppers, but caution that the maintaining the independence of the Federal Reserve and tracking broader economic conditions like consumer confidence and economic uncertainty, will help predict where the housing market is heading in the year ahead.
The latest Primary Mortgage Market Survey® (PMMS®), released by Freddie Mac Thursday, shows the 30-year fixed-rate mortgage (FRM) averaging 6.11% this week, following 6.10% the previous week and 6.09% before that, which was just above the lowest level seen in over three years.
“For the last several weeks, the 30-year fixed-rate mortgage has remained at its lowest level in years,” said Sam Khater, Freddie Mac’s chief economist. “The combination of improving affordability and availability of homes to purchase is a positive sign for buyers and sellers heading into the spring home sales season.”
Economists note there have been shifts in the composition of the rates of mortgage holders.
“Data from ICE Mortgage Technology shows that nearly one-fifth of mortgage holders have a mortgage rate over 6%, about the same share with a rate below 3%, said Bright MLS Chief Economist Lisa Sturtevant. “Some analysts have suggested that more homeowners will list their homes for sale and inventory will increase as the share of homeowners with an above-6% rate grows. However, this trend could actually lead to tighter inventory as more homeowners take the opportunity to refinance and decide to remain in their homes longer.”
Sturtevant noted the Mortgage Bankers Association reported this week that mortgage purchase applications have been falling, while refinance activity has been on the rise.
“Instead of trading in both their rate and home for a new home, more homeowners with above-6% rates seem to be just taking the opportunity to acquire a new lower rate but stay in the same home,” she said.
Being able to afford a home also depends on more than just mortgage rates, noted Realtor.com Senior Economist Anthony Smith. Wage growth, supported by low inflation and a stable labor market, is what ultimately improves household purchasing power, he stated. “Whether buying a first home, relocating, or moving up, American families need both stable prices and steady income growth,” Smith said. “A Fed that is seen as credibly delivering on its dual mandate of price stability and maximum employment is the most durable path to better housing affordability over time.”
Sturtevant said all eyes are on rates and how the selection of the new Fed chair could drive rates in the months ahead, however, “The uncertainty around rates suggests that it is going to be more important to track broader economic conditions, such as consumer confidence and economic uncertainty to help predict where the housing market is heading in 2026.”
Mortgage rates are not directly set by the Fed but instead reflect long-term yields, which respond to shifting economic signals, market sentiment and perceived risks, the economists noted.
While the Fed held rates steady at its January meeting, the nomination of Kevin Warsh as the next Federal Reserve Chair has re-centered attention on the importance of policy credibility and investor expectations, Smith said.
“If investors grow uncertain about the Fed’s intentions or begin to question its independence, long-term yields can rise even during a rate-cutting cycle,” Smith said. “That paradox underscores the risk of mixing political objectives with monetary policy. For housing, that means aggressive calls for rate cuts may not lower mortgage rates unless market confidence in the Fed’s inflation-fighting credibility remains intact.”
For the full report by Freddie Mac, click here.
