Mortgage & Housing Update 2/7/2025

A crazy week for politics and markets saw mortgage rates drift closer to the 6s. The week started with a bombshell: Trump slapping 25% blanket tariffs on Mexico and Canada, and an additional 10% tariff on Chinese imports. Leading to major freakouts and threatened retaliatory tariffs. Would this tip Mexico & Canada into recession? Wouldn’t this cause a spike in US inflation? 

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“Core” PCE (inflation) flat at +2.8% YoY. But if you look closer, the monthly trend was very encouraging. [Bureau of Economic Analysis] The Fed’s target for inflation is 2.00%, so we’re getting really close.

• Over the last 6 months, “Core” PCE has risen by 1.13%. If you annualized that (by multiplying by 2) you get 2.25%.
• Over the last 3 months, “Core” PCE has risen by 0.54%. If you annualize that (by multiplying by 4) you get 2.15%.
• The Fed’s target for inflation is 2.00%

Job openings drop

The JOLTs report (Job Openings and Labor Turnover) revealed that job openings fell significantly, declined from 8.15 million in November to 7.60 million in December. In general, companies aren’t hiring much, and workers aren’t quitting much. In other words, the job market is nowhere near as tight as it used to be, and that’s evident in slower annual wage growth. [Source: BLS]

Mortgage rates decline briefly below 7%

Since hitting 7.25% in January, average 30-year mortgage rates have been drifting lower — not necessarily due to the inflation or jobs data. Instead, we’ve had a ‘risk-off’ trade (from stocks into bonds), and comments from the US Treasury that helped alleviate bond supply fears. As a result, bond prices increased and bond yields decreased. That’s helped average 30-yr mortgage rates move closer to the 6 percent range. [Source: Mortgage News Daily]

Nationwide inventory approaching pre-pandemic levels. 

Homes for sale always peaks in September/October, declines through winter, and then starts rising again in March. That said, inventory continues to recover from its COVID-era lows. January 2025 active inventory of 829,376 homes was 25% above January 2024 levels, and now within 13% of pre-pandemic levels! [Source: Realtor.com]

If the jobs and inflation reports continue to come in lower than expected, mortgage rates could move firmly into the 6s. Just in time for the Spring selling season. 

Get ready for this by ➡️ Connecting with me for #homebuyertips and #FREE #consultation. ✅

I encourage you to get pre-approved.

Pauline Lee | pauline@indmortgage.com | (617) 965-1988 x205 | https://www.indmortgage.com/mortgagehousingupdate20240207/