Rates fell to the lowest level in two months — good news for affordability — but pending sales also dipped, and declining confidence may keep buyers sidelined.

Key Points

• The 30-year fixed-rate mortgage fell to 6.76%, the lowest level in two months.
• Several housing market indicators — including pending and new home sales — suggest that potential buyers are holding off for now.
• That’s leading to growing inventory and slower price growth nationwide, and particularly in Florida.
• The 15-year fixed rate dropped below 6% this week, coming in at 5.94%. A year ago it was at 6.26%.
• Economic uncertainties, including tariffs, federal job cuts, and immigrant deportations, are contributing to a decline in consumer confidence.
• Despite lower mortgage rates and growing inventory, the housing market faces challenges due to economic volatility and consumer concerns about inflation.
• Pending home sales dropped 4.6% between December and January and were down 5.2% compared to a year ago.
• New home sales fell 10.5% from December and down 1.1% year-over-year, according to the U.S. Census Bureau.
• Mortgage applications continued to slow, with overall applications down 1.2% compared to the week before.
• Increasing supply is suppressing home price growth, with the median U.S. home sale price rising just 3.5% year-over-year.
• Florida had 172,209 homes for sale at the end of January, the highest inventory of any month on record and up 23% compared to a year ago.

Mortgage rates are steadily declining, but so are pending home sales. It’s unclear whether the easing of rates can offset growing concerns among potential homebuyers about where the economy is headed.

The 30-year fixed-rate mortgage averaged 6.76% this week, according to the latest Freddie Mac survey. That’s down from 6.85% the week before and is at its lowest level since December.

The 15-year fixed rate dropped below 6% this week, coming in at 5.94%. A year ago it was at 6.26%.

Economic Unknowns Hindering Buyer Confidence

Lower mortgage rates and growing inventory would normally be encouraging signs heading into the spring homebuying season, but this year, they’re coming at a cost. The decline in rates and 10-year Treasury yields reflect expectations that the economy is slowing down, said Samir Dedhia, CEO of One Real Mortgage.

“As uncertainty lingers, investors are shifting toward bonds as a safe haven, helping to push mortgage rates lower,” Dedhia said. “Although rate improvements offer relief for buyers, market volatility is expected to persist in the coming months as economic policies and data continue to influence investor sentiment.”

Samir Dedhia, CEO of One Real Mortgage

Consumers are concerned about the impact tariffs, federal job cuts, and immigrant deportations could have on the overall economy. In February, consumer confidence fell at the fastest pace in more than three years, while expectations of rising inflation jumped.

But for those set on buying a home, declining rates could spur some consumers to act.

“Although a slowing economy may not seem like a good thing, lower rates could give the housing market the shot in the arm that it so desperately needs,” said Lisa Sturtevant, chief economist at Bright MLS.

Lisa Sturtevant, chief economist at Bright MLS

Pending and New Home Sales Plunge

For now, however, homebuying activity remains subdued. Pending sales dropped 4.6% between December and January and were down 5.2% compared to a year ago, reflecting a significantly slower-than-expected pace. The decline follows a similar dip in December.

The Pending Home Sales Index was 70.6, an all-time low, according to the National Association of Realtors, suggesting that fewer home sales will be closing this spring.

After ending 2024 on a high note, new home sales also disappointed in January, falling 10.5% from December and down 1.1% year-over-year, according to the U.S. Census Bureau.

This suggests housing costs are still too high, especially during a period of economic uncertainty, according to Hannah Jones, senior economic research analyst at Realtor.com.

Mortgage applications also continued to slow, according to the Mortgage Bankers Association. Overall applications were down 1.2% compared to the week before, while the seasonally adjusted purchase index was flat. Purchase applications were up about 3% compared to a year ago, however, when mortgage rates were closer to 7%.

Price Growth Slows as Inventory Builds (Especially in Florida)

Increasing supply appears to be suppressing home price growth, according to the latest Redfin market report. The median U.S. home sale price rose just 3.5% year-over-year during the four weeks ending Feb. 23, and median time on market — 56 days — is nearly a week longer than a year ago. While bad news for sellers, it suggests that buyers have more negotiating power — if they’re willing to enter the market.

In terms of inventory, one state in particular stands out. Florida had 172,209 homes for sale at the end of January, the highest inventory of any month on record and up 23% compared to a year ago, according to a separate Redfin report. Florida’s condominium inventory is also at an all-time high.

All of that supply is pushing prices down, with home values in several Florida metros falling significantly year-over-year.

Recent Developments and Practical Applications

Despite the challenges, there are signs of optimism. Some economists suggest that the current market conditions could present opportunities for first-time buyers and investors looking to enter the market at lower prices. Additionally, the federal government’s recent policies aimed at stabilizing the economy could provide a boost to the housing market in the coming months.

For potential buyers, it’s crucial to stay informed about market trends and economic indicators. Engaging with real estate professionals and financial advisors can provide valuable insights and help navigate the complexities of the current market.

In conclusion, while the housing market faces significant headwinds, the declining mortgage rates and growing inventory offer a glimmer of hope. Buyers and sellers alike should remain vigilant and adaptable as the market continues to evolve.