Tariffs Regain Spotlight
Despite a lack of major economic reports, it was another volatile week last week for mortgage markets. Investors reacted daily to the latest news about the proposed government spending bill, until tariffs reclaimed the spotlight last Friday. The net result, though, was that mortgage rates ended last week just slightly higher.
Tariff Shifts Rattle Markets
The focus of investors continues to shift rapidly. Last month, higher tariffs and a trade war appeared likely to slow economic growth, reducing future inflationary pressures, which would be good for mortgage rates. However, easing trade tensions with China and other countries had reduced those worries in recent weeks, and attention turned to the new government spending bill. Investors anticipate that proposed tax cuts could add trillions of dollars to the deficit and boost economic growth, both of which would be negative for mortgage markets. The government finances its deficit by issuing bonds, and yields generally must rise to entice investors to purchase larger quantities. The latest abrupt shift for investors took place last Friday morning when President Trump recommended raising tariffs on the European Union to 50% beginning June 1 due to a lack of progress on negotiating trade deals.
April Home Sales Mixed Amid Tariff Jitters
In April, sales of existing homes fell slightly from March, weaker than the consensus forecast, to the slowest pace for April since 2009. The median existing-home price of $414,000 was up 2% from last year at this time, at a record for the month of April. Inventories remain stuck at historically low levels, standing at just a 4.4-month supply nationally, far below the 6-month supply typical in a balanced market. However, this was the largest level in five years, and inventories were 20% higher than a year ago.
New Home Sales Surge in April
Sales of new homes displayed much better performance in April, rising 11% from March, far above the consensus forecast. New home sales were 3% higher than a year ago. The median new-home price of $407,200 was down 2% from last year at this time. The supply of new homes remains near the highest level since 2007.
Builder Sentiment Hits 18-Month Low
The latest home building data was in line with expectations. Overall housing starts in April rose 2% from March, while single-family starts sank 2% to the lowest level since July 2024. Single-family building permits, a leading indicator of future construction, dropped 5% from March. A separate survey of home builder sentiment on housing market conditions from the NAHB unexpectedly plunged to the lowest level in 18 months. Builders reported that uncertainty about tariffs and rising costs made it difficult to price their homes.
Mortgage Rates for the week of 5-27-2025