Buyers back in the market as mortgage rates plateau 

A small decline in market volatility is providing some signals that the spring homebuying season could be partially salvaged.

Mortgage rates stabilized, while mortgage applications jumped this week. Home tours are also rising faster than a year ago as potential buyers appear willing to set aside some of their economic uncertainties. There were also some positive developments related to tariffs, which may help with consumer confidence.

The 30-year fixed-rate mortgage remained unchanged at 6.76% this week, according to Freddie Mac, down significantly from a year ago when rates hit 7.09%. The expectation that the Federal Reserve would not make changes to short-term interest rates — which Fed Chair Jerome Powell confirmed during a May 7 press conference — led to a quiet week.

Calming mortgage rates reflect "a balancing act in the broader economy," said Samir Dedhia, CEO of One Real Mortgage.

"Although the Fed chose to hold rates steady, concerns around inflation and the potential impact of new tariffs are keeping investors on edge," Dedhia said. "That uncertainty has carried over into the bond market, which influences mortgage pricing — but for now, it hasn't triggered any major rate spikes."

A big jump in loan activity

Mortgage applications jumped 11% this week, according to the Mortgage Bankers Association. Purchase applications led the way, up 12% compared to the previous week and 13% higher than a year ago.

Mike Fratantoni, MBA's SVP and chief economist, said the "hard data on inflation and unemployment will continue to drive interest rates," and anticipates "only a slight downward trend" for the rest of 2025. He expects mortgage application volume to continue outpacing last year's numbers.

Will consumer confidence improve?

Uncertainty over tariffs has impacted consumer confidence as people worry about rising prices and job security. The May 8 announcement that the U.S. and the United Kingdom reached a trade agreement may have more of a positive psychological impact than a direct one on housing, said Joel Berner, senior economist at Realtor.com.

"Though trade with the UK does not have nearly as much direct impact on the housing market as trade with Mexico, Canada, and China (who supply a lot of home construction inputs), any de-escalation of the global trade war is a welcome development," Berner said. 

Demand still lurking

Home touring is up compared to a year ago, according to Redfin's four-week rolling report. While potential buyers are looking, the lack of affordability appears to be holding many back, with the median U.S. monthly housing payment hitting a new all-time high of $2,868 for the four weeks ending May 4, the report found.

"April is typically a busy month, but spring is off to a slow start this year," said Nicole Stewart, an Idaho-based Redfin Premier agent. "There are still some prospective buyers who believe mortgage rates will fall soon, and they're waiting for that to happen. Costs are so high that buyers who are moving forward with a purchase want the home to be perfect; they're asking sellers for more repairs and negotiating more than usual."

Home price growth does appear to be slowing in some parts of the country. Home sale prices increased in 83% of metro areas during the first quarter of 2025, according to the National Association of Realtors — down from 89% in the fourth quarter of 2024. The South in particular lagged behind other regions "with declining sales and virtually no price appreciation," NAR Chief Economist Lawrence Yun said in a news release.

"A few areas where home prices declined a year or two ago are now rebounding, including Boise, Las Vegas, Salt Lake City, San Francisco and Seattle," Yun said. "Similarly, some markets currently experiencing price declines — but with solid job growth — could see prices recover in the near future, such as Austin, San Antonio, Huntsville, Myrtle Beach, Raleigh and many Florida markets."