Your Lake of the Ozarks Mortgage Lender: Tariffs, Inflation, Economic Activity, Consumer Sentiment and Housing

Monday, April 28, 2025

Tariffs, Inflation, Economic Activity, Consumer Sentiment and Housing

WHAT TO WATCH:

Home borrowing costs, economic activity, inflation, and tariffs will dominate headlines in the coming months, and their outcomes could significantly influence consumer sentiment toward achieving the American Dream of homeownership.

Fixed mortgage rates, particularly the 30-year, have eased from their multi-year peak of nearly 8% in fall 2023 but remain stuck just above 6.5%.

According to Fannie Mae's March Commentary, rates are expected to decline throughout 2025, potentially sparking a modest uptick in housing activity. “We think mortgage rates will dip even lower within the next quarter, closing the year around 6.3%, which could entice some sidelined buyers back into the market,” said Mark Palim, Fannie Mae's Senior Vice President and Chief Economist.

Economic activity plays a critical role in shaping housing markets, driving prices, affordability, supply, and demand. Robust job growth, rising wages, or new industries can ignite housing demand, while slowdowns, triggered by recessions or high interest rates, often cool it off.

Meanwhile, inflation and tariffs cast a shadow of uncertainty over consumers and businesses alike. Inflation erodes purchasing power from both the demand and cost sides, while tariffs disrupt supply chains and inflate prices. Together, they create a double whammy, prompting businesses to pause investment and hiring, and leaving consumers hesitant to spend as they await clarity.

The bottom line? The interplay of falling mortgage rates, economic momentum, and the inflationary pressures of tariffs will determine whether the housing market gains traction or stalls. For aspiring homeowners, the path to the American Dream hinges on how these forces align in 2025.

Source: Mortgage Market Guide

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