Mortgage rates are expected to see a slight decrease in the coming weeks, with a target range in the low-6% range by the end of the year.
Realtor.com's senior economist Joel Berner joins Wealth host Brad Smith to discuss how the most recent inflation data provides some relief for rates and the ongoing uncertainty in the US housing market, particularly regarding policy and its effects on buyers, sellers, and builders.
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What are your expectations and outlook on mortgage rates? What is the sweet spot?
Today's inflation news was really helpful. Uh we think that that's going to give a little bit of space for mortgage rates to come down. You know, the big fear uh has always been tempering inflation with how we've kept mortgage rates high, uh and seen them kind of creep up in the last couple months. Though in the last few weeks, we've seen some relief as the 10-year Treasury yield has softened. Uh so we expect to see mortgage rates come down just a little bit in the coming weeks, uh but we don't expect to see major relief, like getting into the kind of 3%, 4% range that we saw a few years ago. Uh we're kind of expecting to end the year in the high or in the low sixes, I should say.
So, is policy-related uncertainty impacting the housing market? How How are buyers and sellers both kind of going about their own expectations on policy?
Uncertainty is really what's the the name of the game right now. So buyers are looking around and, uh you know, some of them have lost jobs, some of them are seeing uh their businesses struggle, uh due to the trade war currently going on and uh feeling a little reluctant to maybe jump in. And uh for sellers, the same is true too. Mortgage rates are remaining uncertain and remaining uh an unclear path as to how fast the market will be moving and how fast they'll be able to sell homes. And a third party that has uh a lot of stake in policy is builders. Uh builders are looking around and saying, "My inputs are going to increase in cost because they're coming from other countries." And so we saw in the most recent new construction data a pickup in completions and a slowdown in starts. Uh so what that means is builders are really trying to get their projects finished and are a little reluctant to start new ones, uh because of the uncertainty they see in the market going forward.
Is that uncertainty tied to tariffs or is there something else as we've talked with one economist earlier today about immigration or reverse immigration actually, impacting some of the labor inputs as well.
It's both. Yeah, tariffs are a major part of it. Uh the cost of construction inputs are going to be a burden for builders to get over, but also, uh we know that about a third of the construction labor force is born outside of the United States. So there's going to be a pinch on the people who are actually building these new homes. Uh and it's going to be a little bit more difficult for builders to train and pay uh their employees than it was a few years ago.