This week, the 30-year fixed fell to 6.63% from last week’s 6.76%. That’s a hefty 13 basis points drop.
The Freddie Mac rate survey hasn’t seen rates this low since Dec. 12.
Locally, the news is even better for well-qualified borrowers who can get a 30-year fixed rate at 5.99% with 1.5 points.
Also see: March mortgage outlook: Hostile rates, but friendly price cuts
So, what gives?
The economy is slowing down. Here is some anecdotal evidence:
—Employers added 77,000 jobs in February compared with 186,000 new jobs in January, according to a survey of employers by ADP.
—Retail sales slipped 0.9% in January, the Commerce Department reported.
—Consumer confidence declined by 7 points to 98.3 in February, its lowest level since August 2021, according to the Conference Board.
What are the experts saying about economic matters besides inflation?
Also see: Housing will ‘unfreeze’ in weeks, Treasury secretary says
“Tariffs are slowing the economy down,” said Mark Vitner, chief economist at Piedmont Crescent Capital. “When uncertainty prevails, the economy slows down.”
Regarding the pace of President Donald Trump’s actions on federal job cuts and new import duties: “The economy has slowed too abruptly,” Vitner said. “Trump time is between warp speed and ludicrous speed.”
Vitner thinks consumers believe fewer jobs will be created. “A lot of government workers won’t be able to make the jump all that seamlessly.”
Raymond Sfeir, director of Economic Research at Chapman University, says the economy looks shaky. “The tariff issue is much worse than I thought,” he told me. “Prices were lower (before tariffs) because we trade with other countries. I would not be surprised if the GDP went negative for one or two quarters.”
As for business owners, Sfeir says they are uncertain about the future. “Uncertainty for business owners means postponing investments,” he said.
And workers? Sfeir thinks thousands if not tens of thousands might not be able to find a job.
Others see a potential recession ahead.
“If tariffs stick, it will be recessionary,” said Richard K. Green, director and chair, Lusk Center, USC. “The guy (Trump) changes his mind every five minutes.”
Green thinks consumer prices will be higher, and the manufacturing process will be compromised because there is less competition, should the tariffs stick.
Concerning government job losses, Green thinks some will have an easier time than others in respect to finding work. “The executive talent in the federal government is pretty darn good,” he said. “Workers further down may have a tougher time.”
What are the experts predicting about home prices and mortgage rates?
Vitner doesn’t expect home price to decline in Southern California.
“If rates get below 6%, they won’t stay there for long,” he said. “Rates will be between 6.25% and 7.25% for the next 15 years.”
Sfeir at Chapman says imported lumber will affect housing costs. “New homes will go up in price.” He sees Orange County home prices going up 3% in 2025.
He also expect mortgage rates will not go below 6%.
On the other hand, Green sees Southern California home prices remaining level.
“We are close to a rate ceiling when rates were above 7%,” he said. “If the economy collapses, rates will be in the 5s. The government job losses and the tariffs will push us toward a recession.”
My perspective: I think home prices are going to stay flat this year.
There is so much volatility in the bond market (mortgage rates tend to follow the 10-year Treasury bond), I think we’re going to see some wild rate swings for the next few months. Ideally, if you are in the market for a mortgage, try to catch it on the down stroke. Like Green, I do believe we’re going to see mortgage rates in the mid-5s by this summer.
And yes, I think a recession is coming our way in 2026.
As an aside, here’s my advice to you. If you work for the federal government or any other employer where you are on the job bubble — and you own a home — get a home equity line-of-credit on your house (in case of emergency). I advise not to make any substantial purchases until the layoff dust settles.
Freddie Mac rate news
The 30-year fixed rate averaged 6.63%, 13 basis points lower than last week. The 15-year fixed rate averaged 5.79%, 15 basis points lower than last week.
The Mortgage Bankers Association reported a 20.4% mortgage application increase compared with one week ago.
Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $806,500 loan, last year’s payment was $140 more than this week’s payment of $5,161.
What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with one point: A 30-year FHA at 5.49%, a 15-year conventional at 5.25%, a 30-year conventional at 6.125%, a 15-year conventional high balance at 5.75% ($806,501 to $1,209,750 in LA and OC and $806,501 to $1,077,550 in San Diego), a 30-year-high balance conventional at 6.5% and a jumbo 30-year fixed at 6.375%.
Eye-catcher loan program of the week: A 30-year mortgage, with 30% down locked for the first 5 years at 5.875% with 1 point cost.
Jeff Lazerson, president of Mortgage Grader, can be reached at 949-322-8640 or jlazerson@mortgagegrader.com.