The central bank’s latest decision arrives with plenty of uncertainty still hovering over the housing outlook
The Federal Reserve held interest rates steady once again in Wednesday’s decision, but attention is already shifting to the central bank’s approach for the rest of the year – and the question of whether rate hikes could be ahead.
Soaring oil prices over the past week amid a fresh escalation in the US-Iran war have seen financial markets price in a higher chance of rate increases, with Fed chair Kevin Warsh also striking a hawkish tone on the need to quell inflation.
Mortgage industry members got the result they expected with the Fed’s decision to leave rates unchanged today, although a recent uptick in 10-year government Treasury yields has sent mortgage rates higher.
Sonoran Lending president and senior loan officer Jay Lessard (pictured top) told Mortgage Professional America he’s still optimistic about the outlook for the rest of 2026, although much will depend on how the economy fares amid continuing headwinds.
“If inflation continues to trend lower and the economy slows without a significant resurgence in price pressures, we could see mortgage rates ease somewhat before year-end,” he said.
“On the other hand, if inflation remains stubborn or geopolitical events continue to push Treasury yields higher, rates could remain where they are or even move slightly higher. Ultimately, I believe we will see improvements, but it will likely be slow and gradual improvements.”
Some homebuyers pushing ahead regardless of Fed moves
The good news for mortgage market watchers is that some brokers say buyers are less focused on the Fed and mortgage rate fluctuations, and more on getting their own finances in order as they push ahead with purchasing plans.
“Clients aren’t necessarily calling about the Fed decision,” Lessard said. “What we’re seeing is a growing number of buyers reaching out to prepare for homeownership. Many are getting preapproved, reviewing their financing options, and putting themselves in a position to act when the right home becomes available.
“Rather than trying to time the market perfectly, they’re focusing on being ready when the opportunity presents itself. I think there’s a growing realization that if mortgage rates improve, competition for homes is likely to increase. Buyers who prepare now will be in a much stronger position than those who wait until rates have already fallen.”
The outbreak of the Iran war in February threw a new curveball into the US housing market outlook, and for many observers a definitive end to that conflict could mark a turning point for a market that’s still struggling to get off the ground this year.
A cautiously optimistic outlook
Lessard said he remains optimistic about the path ahead for the next 12 months, partly because a cooler market is giving buyers a wider range of options and in some cases better purchasing power even despite rate fluctuations.
“While affordability continues to be a challenge for many buyers, we’re starting to see more inventory come to market in many areas, giving buyers more choice and reducing some of the intense competition we’ve experienced in past years,” he said.
“Demand for homeownership remains strong. People are still getting married, growing their families, relocating for work, and looking to build long-term wealth through homeownership. Those life events don’t stop because interest rates are higher.”
While mortgage rate jumps in recent weeks have grabbed the headlines, the 30-year fixed average is still below where it sat 12 months prior.
Last week, Freddie Mac said that benchmark rate averaged 6.58%, up from the week before but lower than its level of 6.74% the same time last year.
And Lessard said that even a slight fall in mortgage rates could be seen by buyers as a big boost. “If mortgage rates ease even modestly, I believe we’ll see increased buyer activity,” he said. “The biggest challenge will be balancing that renewed demand with available inventory.
“Overall, I think we’re moving toward a healthier, more balanced market – one that creates opportunities for both buyers and sellers instead of heavily favoring one side or the other.”
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