By Shaina Mishkin

Buying a house is set to become more affordable as falling Treasury yields bring mortgage rates down. Stock market upheaval could blunt demand for homes -- but some buyers may take the opportunity to jump in.

President Donald Trump on Wednesday announced sweeping new tariffs, pushing stocks down and igniting fears about slower economic growth and a recession. White House spokesman Kush Desai told Barron's via email that tariffs are part of the administration's economic plan that would benefit consumers.

The decline could cause well-off home buyers who have significant portions of their portfolio in stocks to hit the breaks. A falling stock market can cut into consumer confidence and home demand, particularly at the high end of the market, Barron's previously reported.

But it could be a boon for buyers more concerned with mortgage rates than stocks. "The tanking stock market has shifted money into the bond market," Lawrence Yun, the National Association of Realtors' chief economist, says, noting that the average rate on Federal Housing Administration and Veterans Affairs loans is headed below 6%. "That is very good news for the housing sector."

Mortgage rates have been on the downswing in recent weeks. Freddie Mac data show the 30-year fixed rate dropping nearly half a percentage point from January's high to a recent 6.64%. Despite the decline, mortgage rates remain several percentage points higher than they were before the pandemic, while existing-home sale prices as of February continued to rise.

Rates are headed even lower, Treasury yields suggest. The 10-year Treasury yield, an indicator of where mortgage rates are heading, saw its greatest one-week decline since August, according to Dow Jones Market Data. Lower mortgage rates could be a green light for first-time buyers who feel secure in their jobs and have been saving up a down payment separate from the stock market.

Those buyers "are going to pounce on [lower mortgage rates] as an opportunity possibly to buy in a market where they can find value," says Ivy Zelman, executive vice president of real estate research firm Zelman & Associates.

Investors in home builders were betting on Friday that lower rates would drive demand. The iShares U.S. Home Construction exchange-traded fund was up 2.5%, bucking the broader market's trend. D.R. Horton, the nation's largest home builder, had gained even more, at 5.5%.

Higher-end buyers, meanwhile, could pull back -- and any response from first-timers on lower rates could evaporate if the macroeconomic picture deteriorates or job losses ramp up. "If consumers are shaky and they are not feeling good about their personal wallets, they are going to be hesitant on spending," notes Zelman. "If they don't have a job, they are definitely not spending."

How the conflicting headwinds and tailwinds ultimately net out will become clearer on Wednesday, when the Mortgage Bankers Association releases its weekly measure of home loan purchase applications. Existing-home sales could get a bump from the drop in rates, Zelman notes -- but don't read too much into the increase from unusually low levels. "It's not going to be too heroic to see the existing market actually improve, from a volume perspective, off of the very low base," she says.

Write to Shaina Mishkin at shaina.mishkin@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

April 04, 2025 14:18 ET (18:18 GMT)

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