Recent reports suggest a slowdown in manufacturing, job growth, and consumer spending. Consumer spending, which drives more than two-thirds of U.S. economic activity, fell by 0.2% from December 2024 to January 2025 – the first decline since March 2023 and the largest drop in nearly four years. This slowdown directly affects businesses. Retailers, manufacturers, and service providers are seeing reduced sales and revenue, forcing smaller businesses or those with thin margins to cut costs – think layoffs, reduced worker hours, or delayed investments in equipment and expansion.
The latest national manufacturing report, the ISM Index, showed slight expansion in February but declines in both the employment and new orders indices, alongside rising inflation expectations. Consumer confidence also weakened in February, reflecting shifts in consumer attitudes, buying intentions, vacation plans, and expectations for inflation, stock prices, and interest rates. Within the Consumer Confidence Report, perceptions of current labor market conditions deteriorated.
The labor market continues to grow, with the U.S. economy adding 143,000 nonfarm payroll jobs in January 2025, bolstered by upward revisions of 100,000 jobs for the prior two months. December 2024 saw a stronger gain of 256,000 jobs, suggesting resilience despite cooling trends. However, hiring has softened – private sector hiring has declined for 29 consecutive months as of December 2024, the longest streak since the 2008 financial crisis.
What Does This Mean for the Mortgage Market?
Given these trends, combined with the Treasury Department’s efforts to push Treasury yields lower, home borrowing costs have now declined for six straight weeks, tracking the drop in the 10-year Treasury yield. As bond prices rise, yields and interest rates – like the 30-year fixed rate – tend to fall.
For perspective, a new administration in the White House introduces some uncertainty about the economic future of the world’s largest economy. Employers may delay hiring or inventory buildup, and consumers might scale back spending – a natural response during a transition of power.
Bottom Line: Falling home borrowing costs could provide a tailwind as the spring home-buying season begins. Buying a home is never easy, but perseverance pays off.
Source: Mortgage Market Guide
We are ready to help you find the best possible mortgage solution for your situation. Contact Sheila Siegel at Synergy Financial Group today.
