Average mortgage rates in the US are the lowest this year, but would-be homeowners aren’t biting.

The latest update from the MBA on Wednesday found financing costs inching lower for a third week, but application activity nevertheless receded, led by a drop in refis.

It’s reasonable to suggest that anyone who wanted a home and could afford to buy one with prices at record highs and mortgage rates elevated (by post-GFC standards, anyway) already took the plunge. If that’s even partially true, the buyer pool is now comprised mostly of Americans who’re stretched financially. They need more than incremental relief on rates if they’re going to buy a house.

As the figure shows, the 30-year fixed is still near 7% despite not rising since mid-January.

Bonds (Treasurys) have stabilized, and that’s capped mortgage rates, but if home prices are still rising and rates are only marginally lower, the affordability calculus is probably getting worse at the margins, not better.

That explains the juxtaposition between the “lowest” mortgage rates of 2025 and the slowest pace of mortgage applications yet recorded in the new year. “Buyers remain on the fence, although loosening inventory may help support activity in the coming months,” MBA VP Joel Kan remarked, parroting what, by now, is a repetitive supply-side bull case.

Speaking of supply, builder sentiment for February slipped to the worst levels since September, the NAHB said earlier this week. At 42, the headline gauge fell five points from January, the largest month-to-month decline since May.

The proximate cause of the drop was angst around the trade policies of the builder who occupies the Oval Office. As the figure shows, survey responses collected prior to Trump’s tariff reversal on Canada and Mexico tipped a headline print of just 38 (which would’ve been the worst in over a year), while those collected after Trump postponed the duties suggested a reading of 44.

That’s a rather large difference, and it speaks to the sort of psychological distress Trump instills when he threatens to do something then reverses himself within hours. He thinks that’s “the art of the deal,” and maybe it is in some respects, but he’s creating a lot of angst even among people who support him — people like builders.

“With 32% of appliances and 30% of softwood lumber coming from international trade, uncertainty over the scale and scope of tariffs has builders further concerned about costs,” NAHB Chief Economist Robert Dietz remarked, before gently reminding anyone interested that “the elevated pace of shelter inflation requires bending the housing cost curve to enable adding more attainable housing.” That’s a hilariously roundabout way of saying, “Hey, affordability’s tough enough on its own without trade-related price pressures.”

Of course, builder sentiment’s a leading indicator for housing starts, so small wonder new construction slumped nearly 10% in January, a helluva hangover after a big jump to close 2024.

Single-family starts dropped more than 8% to a 993,000 annual rate. Economists cited cold weather which — look, what do you want me to say? The jokes are myriad and they write themselves. Multifamily starts plunged almost 14%.

Commenting on the government data Wednesday, NAHB Chair Carl Harris blamed “high construction costs, elevated mortgage rates and challenging housing affordability” for the slowdown in new construction. He described the prospect of regulatory reform as an “upside risk,” but conceded that “impending tariffs” are a bit of a wet blanket.

Redfin captured it well in an article documenting a meaningful uptick in months of for-sale supply. “It’s a buyer’s market,” Mark Worley wrote. “But for many homebuyers, it doesn’t feel like it.”