Fed unlikely to cut rates again after lackluster jobs report 

While it seems unlikely that the Federal Reserve will cut short-term rates this month following the latest U.S. jobs report, President Donald Trump's recent housing policy announcements may push mortgage rates down — at least for now.

There was little change in both hiring and the nation's unemployment rate in December, according to the U.S. Bureau of Labor Statistics. The country added 50,000 jobs last month, while the unemployment rate ticked down slightly to 4.4%.

Wage growth was steady, rising 0.3% between November and December and 3.8% year-over-year. Wage growth continues to outpace home price growth, which should help improve affordability.

Relatively steady labor market is good news for housing

For now, the labor market's low-hire, low-fire trend is positive for the housing market, according to Jake Krimmel, senior economist at Realtor.com.

"A steadier labor market with fewer downside risks would support household confidence and first-time buyer demand, especially as housing affordability has emerged as a priority for the administration, with more creative policy proposals on the way," Krimmel said.

However, it's unclear which direction the job market will head next. That economic uncertainty could bring headwinds for home sales — even if affordability improves, according to Lisa Sturtevant, chief economist at Bright MLS.

"When people feel uncertain about their own financial situations, they are going to be much more cautious about making big decisions, such as buying or selling a home," Sturtevant said.

What the December jobs report means for the Fed

In light of December's moderate hiring uptick, the Fed will probably pause cuts to short-term interest rates at its Jan. 27-28 meeting, suggested Sam Williamson, senior economist at First American. A pause would give the three 25-basis-point cuts it made last year more time to take effect. 

The central bank indicated after its December meeting that it was ready to take a wait-and-see approach to monetary policy shifts heading into 2026.

"For home buyers, that means mortgage rates are likely to stay close to where they are in the near term. The Fed is still watching inflation closely and isn't in a hurry to cut again unless inflation cools more or the job market weakens further," Williamson said.

Mortgage rates drop following Trump announcement

But mortgage rates did fall in the immediate aftermath of a directive Trump issued on Jan. 8 ordering Fannie Mae and Freddie Mac to buy $200 billion in mortgage-backed securities (MBS). Mortgage News Daily (MND) pegged the 30-year fixed-rate mortgage at 5.99% in the morning on Jan. 9 — the lowest level in three years.

"The caveat is that MBS experienced significant volatility throughout the day and that volatility is likely to continue," MND Chief Operating Officer Matthew Graham wrote in an online post.

While rates "are definitely quite a bit lower," it "remains to be seen how much lower they'll be when the initial volatility settles down — something that will probably require more clarity on the specifics of the MBS buying plan," he added.

Construction softened in the fall

Meanwhile, a new U.S. Census Bureau report showed that housing starts were sluggish in October. The report, which was delayed due to the federal government shutdown last fall, was released on Jan. 9.

The seasonally adjusted annual rate for construction starts of single-family homes was 874,000 in October, down 7.8% from a year earlier. Single-family starts are down 7% on a year-to-date basis, according to the National Association of Home Builders (NAHB).

Building permits for single-family homes were also down 9.4% year-over-year in October, with an annualized rate of 876,000 units. Housing completions were up 2% year-over, putting the annual rate at about 1 million.

Elevated mortgage rates and persistently high construction costs both put a damper on homebuilding activity last fall, according to Danushka Nanayakkara-Skillington, NAHB's assistant vice president for forecasting and analysis.