Trade tensions create silver lining for American homebuyers

As President Trump threatens to impose tariffs on goods from Mexico – and potentially expand tariffs on China to an additional $300 billion worth of imports – experts are warning that consumers may pay the price of increased costs, but there is one area where Americans may be able to benefit.

That is the housing market, as mortgage interest rates decline in step with government bond yields.

The 30-year fixed mortgage fell to 3.99 percent in the week ending on May 30, according to the most recent data from Freddie Mac. That is down from 4.06 percent in the week prior.

Mortgage rates have declined for five weeks and are now near the lowest level in 16 months. Last year at this time, the 30-year fixed mortgage rate was 4.56 percent.

“Mortgage rates are declining because the yields on the 10-year Treasury continue to decline,” Robert Dietz, chief economist for the National Association of Homebuilders, told FOX Business, adding that’s a function of concerns over slowing economic growth which have been reinforced by Trump's tariffs.

The 10-year Treasury yield is near its lowest level since 2017.

What does that mean for prospective buyers?

“It is a good time for homebuyers to go out and make a purchase,” Dietz said.

Mortgage applications, however, fell 3.3 percent according to the Mortgage Bankers Association’s most recent weekly data but there is still time for those thinking about entering the market.

Dietz expects mortgage rates to remain low over coming months. Over the medium-term, he expects rates to gradually rise, but fall whenever the economy enters a soft patch.

“It’s unlikely we will see a 5 percent rate relatively soon,” Dietz said.


However, it is important to note that there are still a number of headwinds in the housing market for potential buyers. Dietz pointed out that affordability still remains a concern, as regulatory burdens continue to make it difficult for builders to increase inventory.