The housing market is improving, but buyers are anxious by Dave Gallagher

While they're showing more interest, economic volatility and uncertainty about the future could prevent buyers from making a home purchase.

Housing market data continues to point toward better days for homebuyers, but uncertainty about the future could keep them sidelined.

According to Freddie Mac's latest survey, mortgage rates averaged 6.65% this week—a slight increase from last week's 6.63%. However, 30-year rates have still hovered around the lowest levels since December despite recent stock market volatility, which should be encouraging news for prospective buyers. 

"The combination of modestly lower mortgage rates and improving inventory is a positive sign for homebuyers in this critical spring homebuying season," said Sam Khater, Freddie Mac's chief economist.

Recession fears may outweigh lower rates.

Still, even as home tours have picked up, that hasn't translated to more home sale contracts, according to Redfin's latest market report. Pending sales were down 6.1% year over year.

"Lower mortgage rates have brought some house hunters who were waiting for costs to come down off the sidelines," said Redfin Economic Research Lead Chen Zhao. "But they haven't yet led to more sales because prospective buyers are still figuring out whether lower payments are enough to justify a home purchase in today's uncertain economy. Many Americans are concerned about things like job security and a potential recession."

Easing inflation could be short-lived.

Unless the economy weakens considerably, mortgage rates aren't expected to fall much further. This week's Consumer Price Index report showed some easing of inflation in February. Still, this is not likely to be enough to prompt the Federal Reserve to lower interest rates when it meets later this month. Because the CPI report was based on data from February—before the Trump administration's back-and-forth on tariffs—the easing of inflation is expected to be short-lived.

With tariffs being announced, rescinded and reinstated, it's not yet clear how those policies will impact inflation. "Tariffs that do make their way onto the books will add to inflation, but we may not see their effect in the CPI for several months," said Realtor.com Sr. Economist Joel Berner.

Stock market tumble raises concerns.

The turmoil in the stock market could lead some buyers to postpone home purchases. The Dow Jones Industrial Average fell 1.3 percent on March 13 and has been down more than 9 percent since December as investors remain concerned about the effects of federal policies on inflation and a possible recession.

"The recent nosedive in the stock market could slow down the housing market even further, as prospective buyers are watching some of their wealth that they might be using for a down payment on a new home evaporate," said Berner.

Mortgage applications, demand indicators are up

While pending sales remain sluggish, mortgage applications are picking up steam, according to the Mortgage Bankers Association. Weekly applications were up 11.2% compared to the previous week, primarily driven by refinance applications. However, purchase applications rose a solid 8% and were up 4% compared to a year ago.

Inventory also continues to rise, with Redfin reporting a 3.1% increase in new listings year over year. The demand is there, according to Redfin's Homebuyer Demand Index, which is up 5% compared to last year. Google searches of "homes for sale" are up 10%. 

Whether that will lead to more sales remains to be seen.