Spring housing market uncertain as mortgage rates remain flat

"The relatively flat trajectory for rates reflects the market's belief that the federal funds rate won't change anytime soon. Federal Reserve policymakers didn't offer any surprises last week when they ended their rate-cutting cycle by holding the policy rate at a range of 3.5% to 3.75%. And the CME Group's Fed Watch tool showed that the next rate cut isn't likely to materialize until June or July."

"Warsh is widely viewed as a more hawkish policymaker with a conservative approach to the Fed's balance sheet and an eye toward a stronger U.S. dollar."

"MND also noted that rates moved slightly higher Monday in the wake of stronger-than-expected manufacturing data that prompted weakness in the bond market. Political uncertainty, both domestically and internationally, is going to be an important factor in rate trajectory, leading to rate volatility and probably higher rates in the weeks ahead, Lisa Sturtevant, chief economist for Bright MLS, said in a statement."

Markets currently price a relatively flat federal funds rate, with the policy rate held at 3.5%–3.75% and the next cut unlikely until June or July. The nomination of Kevin Warsh is seen as relatively hawkish, prompting some investors to price risks of near-term loosening and potential longer-term rate increases. Stronger-than-expected manufacturing data pushed rates slightly higher and weakened the bond market. Domestic and international political uncertainty is expected to increase rate volatility and likely push rates higher in the weeks ahead. Spring housing-market strength depends heavily on the direction of mortgage rates amid ongoing uncertainty.

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