This week saw a jump in mortgage rates as lenders brace themselves for an uncertain economic climate. The Federal Reserve’s recent decision to maintain the current federal funds rate came as no surprise, as noted during their meeting on March 19. The Fed emphasized the need for robust data before altering their policy, but mortgage lenders often adjust their rates more quickly in response to market waves.
In the week ending March 20, the 30-year fixed-rate mortgage averaged 6.8%, marking an increase of 18 basis points from the previous week. For those unfamiliar, a basis point represents one one-hundredth of a percentage point.
The Fed’s Predictable Move
Leading up to the meeting, there was widespread anticipation among Federal Reserve watchers that the committee would opt to keep the federal funds rate at its current range of 4.25%-4.5%. In the subsequent press conference, Chairman Powell highlighted the economic strength, mentioning that significant strides have been made towards the Fed’s targets for inflation and employment over the past two years.
Caution and Concerns of Inflation
Powell acknowledged some uncertainty surrounding the impact of President Trump’s economic policies, particularly in terms of tariffs, immigration, and both fiscal and regulatory changes. "Recent developments, especially in trade, add layers of uncertainty," he remarked. While the Federal Reserve is not rushing to react, Powell did address the fact that rising inflation is partly influenced by tariffs.
Inflation goals might be delayed, according to Powell, with data indicating uncertainty among businesses and households about future economic conditions. Despite this sentiment, the Federal Reserve remains more focused on solid economic data than on feelings of uncertainty. Projections from central bankers suggest the federal funds rate could dip below 4% within the year and hover around 3% by 2027, coinciding with when they aim to achieve a 2% inflation rate.
Interpreting the Home Builder Sentiment
Prospective homeowners are contending with affordability issues and a scarcity of available homes. The natural remedy to a housing shortage is to build more, but the rising costs of lumber and materials, driven by new tariffs, complicate the situation. Builders are hesitant to seek permits unless they’re confident about sales prospects.
Recent figures from March 18 show a 6.8% dip in new home construction permits compared to February 2024, painting a concerning picture for homebuyers. This could mean a downturn in new home availability through the second half of 2025, with the cost potentially out of reach for many borrowers.
Considering a Home Purchase
Finding the perfect time to purchase a house has been elusive since the post-pandemic rebound in mortgage rates. Instead of being fixated on securing a super deal, it’s wiser to focus on what’s best for your financial health. Staying updated with weekly market trends can certainly help guide your decision, but if you find a home that fits your needs and budget, waiting for a significant market shift might not be advisable.
