The tariff tantrum just hit home—literally. After weeks of relative calm, the U.S. housing market is flinching again. Mortgage applications took a sharp dive last week as bond market jitters pushed rates near 7%. Purchase applications dropped 5%, and refis plunged 12%, according to the Mortgage Bankers Association. That's despite purchase activity still hovering 13% above last year's level. But don't let that lull you—Mike Fratantoni, MBA's chief economist, says rate volatility and macro uncertainty are already weighing on buyer sentiment.
It all started with tariffs. Former President Trump's threats—and then partial walk-backs—on new trade levies sent investors dumping stocks and bonds in unison. Treasury yields spiked. Mortgage rates followed. The 30-year fixed surged 20 basis points to 6.81% in a matter of days. By Tuesday, it hit 6.88%, per Mortgage News Daily. This is the fastest jump we've seen since the last time markets feared a policy misstep could derail the economy.
With fixed-rate loans getting too expensive too fast, borrowers are pivoting. Adjustable-rate mortgages (ARMs) now make up 9.6% of applications—the highest share since November. Why? Their teaser rates start closer to 6%. But let's be clear: ARMs don't fix the underlying problem. They're a signal. A signal that housing affordability is cracking again under rate pressure, and that investors should start paying closer attention to what the Fed—and Trump—do next.
