The number of mortgage loans for homes in the fourth quarter of last year decreased by 3% compared to the previous quarter.

This decline is attributed to chronic inventory shortages driving home prices upward, coupled with rising yields on 10-year Treasury bonds that are pushing market interest rates higher. Additionally, concerns about inflation due to the Trump administration’s broad tariff policies are reducing the Federal Reserve’s (Fed) room to lower its benchmark interest rates. Experts point out that this is dampening expectations for mortgage rate cuts and increasing uncertainty in the housing market.

According to the latest residential mortgage origination report released on the 13th by real estate data firm Attom, the total number of mortgage loans in Q4 last year was 1.64 million, a 3% drop from the previous quarter. New mortgage loans amounted to 732,000, down 7.5% from Q3, while refinances rose by 6.4% to 642,000.

The decline in Q4 mortgage loans is primarily due to persistent housing inventory shortages. Although the national housing supply increased slightly last year, it still falls short of demand by 3.8 million homes. At the current pace of construction, it is projected to take more than seven years to address the ongoing decline in homebuying power and build up new housing stock. According to estimates from the National Association of Home Builders (NAHB), single-family home starts last year reached 1.01 million units, a 6.5% increase from 2023’s 142 million. However, total housing starts dropped by 60,000 units to 1.36 million in 2024 from 1.42 million in 2023, driven by a decline in multifamily construction. The situation is unlikely to improve significantly this year. Against this backdrop, CoreLogic forecasts that U.S. home price growth will reach 4.1% this year, up 0.7 percentage points from last year’s 3.4%.

The most pressing issue is that the benchmark 30-year mortgage rate, a key indicator for mortgage loans, refuses to decline. Despite the Fed cutting its benchmark rate three times last year—including the first cut in four years in September—mortgage rates have remained stubbornly high. According to mortgage specialist Freddie Mac, the 30-year mortgage rate stood at 6.65% as of today.

Considering that mortgage rates were at 3% in early 2022, this represents a significant increase. As a result, homeowners who secured low-rate mortgages are unable to upgrade or move, reducing the number of homes available on the market. The reason mortgage rates aren’t falling is the persistent rise in 10-year U.S. Treasury yields. After dipping to 3.61% on September 15 last year, the yield climbed to 4.29% by March 12 this year.

The rise in market interest rates, as reflected by Treasury yields, stems from fears that inflation—previously subdued—may resurface due to Trump’s tariff policies. This has led to pessimistic forecasts that the Fed might limit rate cuts to just one this year, maintain current rates, or even raise them. In California, where approximately 13,000 homes need to be rebuilt following a January fire in Los Angeles, Trump’s policies are expected to significantly increase construction and labor costs.

Jared Kuhn, Vice President of homebuilding company Icon, remarked, “Recently, homebuilders have been experiencing a rollercoaster of ups and downs due to high mortgage rates, concerns over housing demand, and tariffs. If high tariffs are imposed and lumber prices surge back to COVID-19-era levels, we could see a halt in home construction and apartment building.”

<Hongyong Park>