Danielle Hale, Chief Economist at Realtor.com®, said that the Fed predicts recent inflation spikes to be short-term, with a continued long-term downward trend. This implies that mortgage rates may decrease, although the decline might not be immediate. While the Fed's rates and mortgage rates are different, their trends usually align. Therefore, when the Fed eventually lowers rates, mortgage rates may follow suit, bringing joy to many homebuyers.

The Fed is expected to cut rates three times this year. Some economists had predicted rate cuts earlier in the year. However, higher-than-expected inflation might delay rate cuts until the end of the year. This means mortgage rates in the spring real estate market may maintain relatively high levels.

Hale pointed out, "Even the Fed itself can't be sure when they'll cut rates, it depends on inflation data." "We're all in a waiting game now."

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The good news is that the Fed hasn't raised rates. The Fed had lowered rates during the COVID-19 pandemic to boost the economy but then began raising rates to combat high inflation. Since March 2022, the Fed has raised rates 11 times.

With both rates and home prices rising, the median price of a typical home in February rose about 78% compared to the same period four years ago. (The calculation method uses median home prices on the Realtor.com website and the average mortgage rates from Freddie Mac, assuming a 20% down payment by buyers and excluding property taxes, insurance, and other costs.)

Buyers shouldn't assume that lower rates will make homeownership more affordable. Instead, lower rates could lead to higher home prices. As more buyers who have been waiting for rate decreases enter the market, this situation may arise. With the limited number of homes for sale, all this additional competition could spark bidding wars, where buyers offer above the listing price, thus driving up prices again.

Hale said, "Buyers and sellers face uncertainties surrounding mortgage rates every day." "Deciding whether to lock in a rate isn't easy." In the future, buyers and sellers need to carefully observe market dynamics to make the wisest decisions.