“Mortgage
applications
were
essentially
flat
last
week.
Ongoing
affordability
pressures
continue
to
shape
borrower
behavior,
driving
increased
interest
in
FHA
and
adjustable-rate
mortgage
(ARM)
products,”

Bob
Broeksmit,
president
and
CEO
of
the

Mortgage
Bankers
Association
(MBA),
said
in
a
statement.

“ARM
applications
rose
to
a
seven-week
high,
reflecting
buyers’
efforts
to
manage
monthly
payments
amid
the
current
interest
rate
and
home
price
environment.”

Inflation
and
existing
home
sales

On
Thursday,
the

National
Association
of
Realtors
(NAR)
reported
that

existing
home
sales
in
January
were
negatively
impacted
by

severe
winter
weather
that
blanketed
much
of
the
country.

The
annualized
sales
rate
of
3.91
million
homes
represented
an
8.4%
decline
from
December
and
a
4.4%
decline
from
January
2025.
While
Winter
Storm
Fern
was
a
contributing
factor,
there
were
other
warning
signs
that
closed
sales
would
decline,
according
to

Bright
MLS
chief
economist
Lisa
Sturtevant.

“Closed
sales generally
represent contracts
made
in
the 30
days prior.

Pending
sales
were
slow
in
December
even
as
mortgage
rates
dropped,”
Sturtevant
explained.
“Many
buyers
stayed
on
the
sidelines,
waiting
not
just
for
lower
rates
but
also
rate
stability. Therefore, the
January
closed
sales
numbers
are
really
reflecting
conditions
buyers encountered during
December.”

But
she
also
believes
buyers
will
encounter
more
favorable
conditions
—
including
more
listings,
slower

home-price
appreciation
and
stable
mortgage
rates
—
as
the
spring
homebuying
season
approaches.

“Market
conditions
will
vary
depending
on
what
part
of
the
country
you
are
in,”
Sturtevant
added.
“There
will likely
be more
sales
in
the
Southeast
and
Southwest
where
inventory
has
climbed,
while
tight
supply
will
continue
to
be
a
constraint
on
home
sales
in
some

Midwestern
and
Northeastern
markets.” 

Consumer
Price
Index
(CPI)
data
for
January
showed
improvement
in
the
annual
inflation
rate
as
prices
rose
2.4%,
down
from
2.7%
growth
in
December.
Shelter-driven
inflation
was
up
0.2%
during
the
month
and
up
3%
for
the
year.

Sam
Williamson,
senior
economist
for

First
American,
said
the
inflation
reading
is
likely
to
keep

Federal
Reserve
policymakers
“cautious
as
they
watch
whether
tariff-related
cost
pressures
feed
through
more
broadly
into
prices.”
But
having
inflation
move
closer
to
the
central
bank’s
2%
annual
target
is
positive
news
as
it
spurs
the
potential
for
further
interest
rate
cuts
in
2026.

“For
housing,
January’s
(inflation)
report
is
another
incremental
tailwind
heading
into
the
spring.
As
inflation
cools
and
markets
price
a
clearer
path
to
easing,
mortgage
rates
can
drift
modestly
lower
even
before
any
policy
move,
providing
a
small
affordability
boost,”
Williamson
said.

“That
would
add
to
recent
improvements
from
slower
home
price
growth
and
rising
incomes,
helping
bring
some
rate-sensitive
demand
back
as
the
market
enters
the
peak
buying
season.”

What
will
the
Fed
do
in
March?

After
the
Fed
lowered
rates
for
a

third
straight
time
in
December,
officials
indicated
that
the
path
to
more
rate
cuts
in
the
near
future
would
be
increasingly
measured.

The
likelihood
of
a
cut
in
March
is
shrinking,
according
to
the


CME
Group’s
FedWatch
tool.
Only
10%
of
interest
rate
traders
think
the
federal
funds
rate
will
be
lowered
after
the
Fed’s
next
meeting
concludes
on
March
18.
That’s
down
from
roughly
21%
only
a
month
earlier.

But
the
odds
are
higher
further
down
the
road,
with
25%
calling
for
a
25-bps
cut
in
late
April
and
50%
expecting
one
by
mid-June.
Lowering
the
fed
funds
rate
to
a
range
of
3.25%
to
3.5%
would
mark
its
lowest
point
since
September
2022. 

Ongoing
conflicts
between
the
Trump
administration
and
the
Federal
Reserve
could
also
filter
into
the
direction
of
mortgage
rates.

The

Supreme
Court
is
expected
to
announce
a
ruling
on
the
president’s
attempt
to

fire
Lisa
Cook
in
the
coming
months.
And
some
lawmakers
have

stated
they
will
not
support
the
nomination
of

Kevin
Warsh
as
the
next
Fed
chair
unless
the
administration
drops
an

investigation
into
current
chair
Jerome
Powell.

Cook,
who
continues
to
have
a
vote
on
interest
rates
in
2026,
offered
her
thoughts
on
monetary
policy
during
a

recent
speech
in
Miami.
She
said
that
persistent
inflation
led
her
to
support
no
cut
at
the
Fed’s

January
meeting.

“At
the
height
of
the
recent
bout
of
high
inflation,
we
promised
that
we
would
return
to
(the
2%
annual)
target,
and
it
was
this
promise
that
kept
inflation
expectations
anchored
and
allowed
us
to
see
the
sharp
disinflation
from
2022
through
2024,”
Cook
said.

“If
we
were
to
lose
credibility,
the
cost
may
not
be
immediately
felt,
but
it
would
be
resoundingly
and
painfully
felt
when
we
need
it
the
most,
in
an
inflation
crisis
such
as
the
one
we
experienced
three
years
ago.”