The Housing Market Thaw Is Just Getting Started

The stock market has fully recovered from the initial tariff scare in April. But that threat has prolonged a deep freeze in another market...

The U.S. housing market has been in gridlock since 2022, when the Federal Reserve began hiking interest rates. Higher mortgage rates crushed affordability – and activity in the housing market crashed.

The Fed began cutting rates again last year. But then tariffs put the economy at risk of inflation... So the central bank has paused additional rate cuts so far in 2025.

This situation won't last forever. The Fed will cut rates at some point. And lower interest rates will likely thaw out the housing market.

Surprisingly, this is already underway... at least compared with recent history.

As we'll explain today, one measure of housing activity just hit a two-year high. That's a good sign. But we still have a long way to go before this market gets back to "normal."

New Mortgage Applications Hit a Two-Year High

The housing market has been incredibly resilient in the face of high mortgage rates.

Everyone expected a housing crash. But U.S. home prices haven't fallen. Rather, the median home price hit an all-time high last month.

Still, high prices don't mean the housing market is healthy. It isn't – because while mortgage rates didn't crash home prices, they did crash housing activity.

Most folks just aren't willing to take on a higher monthly payment right now. No one's buying or selling a home unless they absolutely have to. And this freeze has lasted for several years.

Things are finally changing, though. We can see it through data from the Mortgage Bankers Association ("MBA")...

This industry group collects data related to housing activity. One of its tools is the U.S. MBA Purchase Index.

The Purchase Index tracks the total number of new mortgage applications each week. This is where we saw a painful slowdown in recent years. But in a surprising twist, the index hit a two-year high this month. Take a look...

Mortgage applications have crashed in recent years. The Purchase Index dropped by more than 60% from its early 2021 high to its 2023 low. But as you can see, loan applications have increased in recent months.

The index has been rising for most of 2025. And it just broke out to its highest level in two years.

This tells us two things...

First, despite high mortgage rates, the housing market isn't going to die. Prices have held up. And activity is picking up again – even though mortgage rates have stayed high.

Second, this market still has a long way to go before it gets back to normal. Loan applications remain well below their levels from a few years ago.

That also gives us plenty of runway ahead... And I expect housing activity to soar from here once the Fed finally cuts interest rates.

This is good news for investors. Resilient home prices are acting as a backstop for the U.S. economy. And this new surge in activity will only continue when rates eventually fall.

Good investing,

Brett Eversole