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MortgagePoint ยป Your Trusted Source for Mortgage Banking and Servicing News 18 July 2025 C O V E R S T O R Y FAULT LINES IN THE MARKET Behind steady economic growth, cracks are starting to show, from stalled sales to diverging regional trends. What do the experts say is coming next? B y P H I L B R I T T S even months after President Trump took office for his second term, the housing landscape is marked by a complex mix of steady economic growth and emerging vulnerabilities. While GDP growth has hovered around 2.5% to 3% annually in recent years, this year's outlook is notably less optimistic, with forecasts now calling for slower growth amid uncertainty over trade policy and tariffs. President Trump's "Liberation Day" tariff proposals, introduced this past spring, have injected volatility into both the broader economy and the housing sector, with many questions remaining about the ripple effects and long-term impact. Some experts project that tariffs on key building materials, including lumber, steel, and aluminum, could significantly impact the cost of building and purchas- ing a home. This added cost pressure comes at a time when affordability is already stretched for many buyers, and builders, suppliers, and consumers try to absorb or pass on these increases. Meanwhile, mortgage rates have remained stubbornly high, with Freddie Mac pinning the 30-year fixed mort- gage rate at 6.77% as of the late-June time of this writing. This environment has forced both buyers and sellers to recalibrate their expectations, with the market gradually acclimating to rates that, while elevated by recent standards, remain within historical norms. Brisk and often unpredictable legislative and regulatory developments in Washington have also added layers of complexity. The potential for changes to tax policy, GSE reform, and banking deregulation could all reshape the mort- gage landscape in the months ahead. The recent confirmation of Michelle Bowman as Vice Chair of the Federal Reserve signals a possible shift toward a more business-friendly regulation environment, which could entice large banks to re-enter the mortgage space after years of retrenchment. Against this backdrop of uncertainty, shifting policy, and regional divergence, MortgagePoint spoke with two of the industry's leading economists: Michael Fratantoni of the Mortgage Bankers Asso- ciation and Mark Fleming of First Amer- ican Financial Corp., to unpack what these trends mean for lenders, borrowers, and the broader housing economy in the second half of 2025 and beyond. Liberation Day & Beyond Michael Fratantoni: It's important to break these six months into three differ- ent parts: The pre-Liberation Day period, the immediate reaction to the Libera- tion Day proposals, and the time since. Coming into this year, we were expecting a slowdown in economic growth. The U.S. economy has been growing about 2.5%-3% annually for the last couple of years. We were looking for about 1.5% this year. We thought the Liberation Day proposals would be quite stagflationary. Our April forecast P H I L B R I T T started covering mortgages and other financial services matters for a suburban Chicago newspaper in the mid-1980s before joining Savings Institutions magazine in 1992. When the publication moved its offices to Washington, D.C., in 1993, he started his own editorial services room and continued to cover mortgages, other finan- cial services subjects, and technology for a variety of websites and publications.