“Prices have ceased their rapid ascent,” Johnson stated, emphasizing that this trend may reverse course post-tariffs. “The impact will be felt by consumers,” he added. Tariffs could also exacerbate the ongoing challenges in the housing market, particularly in relation to high mortgage rates.
Recent data from Freddie Mac indicates that the average rate for a 30-year fixed mortgage currently stands at 6.95%. Despite a series of interest rate cuts by the Federal Reserve, this figure has shown an upward trajectory in recent months. In the most recent development, Fed Chair Jerome Powell opted to maintain interest rates unchanged, suggesting a potential slowdown in future rate cuts.
Experts fear that the tariffs imposed by the current administration may lead to job losses, with tariffs on Mexico and Canada potentially further complicating matters. These duties could delay interest rate cuts or even prompt rate hikes, as the Fed may respond to curb any potential inflationary pressures. “In the face of rising costs, the Fed will act in accordance with its mandate,” Marc Norman, associate dean at the New York University School of Professional Studies and Schack Institute of Real Estate, informed ABC News.
The Federal Reserve’s benchmark interest rate plays a crucial role in determining mortgage rates, closely mirroring the yield on a 10-year Treasury bond. If the Fed adjusts rates to counteract tariff-induced inflation, mortgage rates might be set on an upward trajectory, as suggested by some experts. “There is concern that the Fed might choose to maintain or even increase rates in response to potential inflation, leading to higher mortgage costs,” Johnson highlighted.
However, Norman indicated that the impact of tariffs on affordability may not be as severe, given the pre-existing challenges in the housing market, such as limited housing supply and escalating construction expenses. “We are already grappling with a crisis,” Norman remarked.
Some experts speculate that Trump’s tariffs could result in elevated home prices and mortgage rates, adding further strain to the housing market.
