Rates Stay Steady as Tariff Chaos Continues

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Home Buyers Are Waiting. Builders Aren't.

The housing market is sending mixed signals right now — buyers are hesitant, sellers are cautious, and the data reflects a market that hasn't yet found its footing. Nationwide pending home sales hit a record low in January, the weakest reading since tracking began in 2001, as buyers remain on the sidelines even with mortgage rates near their lowest point in over years.

The problem isn't rates, but rather that prices are still elevated relative to incomes, and uncertainty around the overall economy, buyers seem to be in a wait-and-see mode. Tariffs on lumber and other building materials are also pushing up construction costs, making it harder for builders to bring affordable new inventory to market.

The good news is that housing starts surged 6.2% in December to a 5-month high, with both single-family homes and apartment construction rising together, a sign that builders are sensing an opportunity in the upcoming months and ramping up supply. More inventory coming to market is exactly what's needed to ease price pressure, and as rates continue to stabilize heading into the spring season, the conditions for a meaningful housing recovery are slowly starting to take shape.

A Fed Divided

The Fed minutes from the January meeting revealed a Fed committee deeply divided on the path forward. Some members are open to further cuts if inflation cooperates, others wanting to hold steady, and several keeping rate hikes on the table if price pressures prove persistent. The central tension is, of course, tariffs: officials are split on whether businesses will absorb those costs or pass them on to consumers, which makes the inflation outlook genuinely uncertain. Separately, Fed Governor Michael Barr when he spoke last week struck a cautious tone, saying the Fed is likely on hold for some time until there's clear evidence that goods price inflation is sustainably retreating.

Trump Tariffs Deemed Unconstitutional

The Supreme Court struck down Trump's IEEPA-based "Liberation Day" tariffs in a 6-3 ruling last week, but the relief was short-lived. Over the weekend, Trump quickly pivoted to imposing new 10% global tariffs under a different law, which he then raised to 15%. Tariffs raise inflation expectations, which push Treasury yields and mortgage rates higher, but the removal of tariffs reduces that inflation risk and can bring rates down. Trump's rapid replacement tariffs mean that trade-driven price pressure hasn't gone away, and markets remain on edge about what comes next.

What to expect this week?

This week's calendar is lighter on data but heavy on Fed speak, with multiple officials scheduled to share their views on rates and inflation throughout the week.

Tuesday is the busiest day for Fed commentary, with Chicago Fed President Austan Goolsbee, Atlanta Fed President Raphael Bostic, Governor Christopher Waller, and Governor Lisa Cook all speaking. After last week's divided FOMC minutes, markets will be listening closely for any clues on whether the Fed is leaning toward cuts or a prolonged hold. We'll also get the February consumer confidence reading, which is expected to tick up slightly to 87.5 from 84.5.

Thursday brings initial jobless claims, expected at 215,000 — up slightly from last week's 206,000 reading. Claims have been gradually creeping higher, and any meaningful jump above expectations would reinforce the case that the labor market is softening and rate cuts should come sooner rather than later.

Friday is the week's main data event, with the Producer Price Index (PPI) for January arriving alongside construction spending figures. Core PPI is expected at 0.4% month-over-month, and markets will be watching to see if wholesale inflation is cooling or starting to reaccelerate — which would directly impact expectations for the Fed's next move.

Bottom line: This week is more about Fed messaging than hard data. With officials deeply divided, any hawkish or dovish comments could nudge rates in either direction heading into the spring homebuying season.

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