Mortgage rates cool down as the spring housing market marches on

Charles Goodwin, vice president of sales at San Francisco-based private lender Kiavi, told HousingWire that he does not expect the Federal Reserve to provide underlying relief for mortgage rates when it meets next week.

Interest rate traders strongly agree with that sentiment as 93% believe that the federal funds rate will remain at a range of 4.25% to 4.5%, according to the CME Group’s FedWatch tool.

“The bond market is balancing inflation and economic volatility at the same time, and as tariff uncertainty continues to ripple through the international community, [the Fed] may wait and see how everything shakes out before moving rates in either direction,” Goodwin said.

Trump vs. Powell

President Donald Trump has been on the warpath again recently in urging the central bank to cut interest rates. He stepped up attacks on social media against Fed Chair Jerome Powell, calling him a “major loser” and saying that “Powell’s termination cannot come fast enough.”

Trump appointed Powell to lead the Fed during his first term in the White House, but the pair have frequently clashed – usually due to interest rate policies — over the years. Powell’s term as Fed chair does not end until May 2026, and speculation that Powell could be preemptively fired is likely contributing to recent rate increases as investors worry that the Fed could lose its independent status.

A pending Supreme Court case, Trump v. Wilcox, could have major implications on Powell’s future. If the justices rule in favor of the president in his decision to fire two independent federal regulators, it would reshape longstanding legal precedent and potentially give Trump the green light to remove Powell.

Kevin Warsh, a former Fed governor and a candidate to lead the central bank during Trump’s first term, has been rumored to be Powell’s successor. But even if Powell were to be replaced before his term ends, the president would still have to contend with the other members of the Federal Open Market Committee who have been steadfast on interest rate policies since the COVID-19 pandemic. For his part, Trump has recently backed down by saying he has “no intention of firing him.”

Where are home sales headed?

The spring home purchase season is in full swing and while sales haven’t been robust, they have generally exceeded last year’s low levels.

This week’s Altos data report shows that weekly pending home sales dipped on a year-over-year basis for the first time in six weeks, but that was an expected decrease due to the Easter holiday weekend. Altos President Mike Simonsen said he anticipates the weekly pending sales figure to rise again next week to 78,000, which would put it back above last year’s pace.

“The takeaway for the weekly pending home sales is that the holiday dip is temporary, and we currently expect home sales in May to resume being higher than last year. Last year’s sales were very low. If we come in below that, it’d be a very bearish market indicator.”

Despite consistently low sentiment from prospective home buyers and sellers, Goodwin said that now is a good time to enter the market. This dovetails with new data from the Mortgage Bankers Association showing that the median monthly mortgage payment from an applicant in March was down 1.2% from a year earlier. That’s partially tied to mortgage rates, which were roughly 50 basis points higher at this time in 2024.

“If buyers wait for lower rates, it could backfire if mortgage rates or home prices rise,” Goodwin said. “Additionally, waiting to buy when rates go down could mean increased competition for available housing stock, leading to bidding wars and increased costs for buyers.”

Goodwin offered four tips for mortgage originators and their clients to keep in mind in the current market environment.

• Get preapproved early. Locking in a budget and a rate range allows buyers to be able to act quickly when the right opportunity comes up.
• Consider rate-lock options. Many lenders offer rate-lock programs with float-down features if rates fall before closing, which could help in navigating this type of uncertain rate environment.
• Factor in long-term affordability. While rates are important, when it comes to purchasing a home, buyers need to consider the big picture. The decision to buy property should include an analysis of monthly payments, local taxes and personal income stability.
• Look into adjustable-rate mortgages or interest-only loans. For buyers who may be looking to sell or even refinance in a few years, adjustable-rate mortgages can be an option that often lowers the initial payment amount.