Hi Friends!
Spring is in full bloom—and not just in gardens. Housing values are also showing signs of growth, offering hope for homeowners and buyers alike. Despite the Federal Reserve holding interest rates steady while adopting a cautious, data-dependent stance, home prices are inching upward. As of March, home values nationwide climbed 2.5% year-over-year, and forecasts suggest even greater gains ahead, with a projected 4.9% increase over the next 12 months. It's a timely reminder: homeownership remains one of the most powerful tools for long-term wealth creation.
Economic Overview: Stable, But Cautious
Initial unemployment claims remain historically low, but there's a catch—it's taking longer to find new jobs. The average unemployment duration now exceeds 23 weeks. This trend underlines the importance of financial preparedness as the economic landscape evolves. While headlines hint at breakthroughs, the real story is more nuanced: the economy is steady, not soaring.
Key Events to Watch This Week:
Tuesday: April Consumer Price Index (CPI) – A key inflation indicator with potential to influence Fed decisions.
Wednesday: OPEC Monthly Report – Updates on global oil supply and its inflationary impact.
Thursday: April Producer Price Index (PPI) and Retail Sales – Critical measures of wholesale prices and consumer spending.
Thursday: Fed Chair Powell speaks – Offers insights on the Fed’s policy outlook.
Friday: University of Michigan Consumer Sentiment Index – A gauge of consumer optimism and spending trends.
Interest Rate Outlook
The Federal Reserve is expected to maintain a cautious path through the remainder of the year:
June 2025: Hold at 4.25%-4.50%
July 2025: Potential 25 bps cut to 4.00%-4.25%
October 2025: Another potential 25 bps cut to 3.75%-4.00%
December 2025: Possible cut to 3.50%-3.75%
However, it's critical to understand: a Fed rate cut doesn't guarantee lower mortgage rates. In some cases, it could have the opposite effect, depending on how bond markets react.
Mortgage & Bond Market Update
Bond prices fell by 15 basis points, nudging mortgage rates slightly higher. Despite encouraging weekend headlines on trade talks, bond markets remain cautious, especially as inflation concerns linger.
Truflation's latest data puts April CPI at 2.3% year-over-year, just below the broader market estimate of 2.4%. While this signals some stabilization, early warnings of renewed inflation are starting to emerge. The Federal Reserve is juggling real-time data that suggests disinflation is leveling off, while tariffs and global supply pressures could stir inflation again.
Housing Market Snapshot
The U.S. housing market remains sluggish, with March 2025 recording a 6% drop in home sales—the steepest monthly decline since 2022. Sales activity has slowed to levels not seen in 25 years.
Why? Affordability.The cost to purchase an average-priced home has nearly doubled over the past five years. The combination of higher interest rates and elevated home prices continues to put pressure on buyers.
However, there is a silver lining:
New listings are up 13.7% year-over-year, as homeowners grow tired of waiting for rates to drop and choose to sell now.
Home prices have cooled, up only 2% from last year, a sign that rising inventory may soon translate into price softening.
Buyers now have more leverage to negotiate—a trend we haven't seen in several years. While lower interest rates remain the long-term affordability solution, falling prices can also ease the burden. Lower purchase prices reduce monthly mortgage costs, taxes, and insurance. In short: now is the time to get out there and negotiate.
Why Homeownership Still Wins
In an era of economic uncertainty, long-term homeownership remains a proven path to financial security. Consider these key points from ResiClub’s analysis:
Home Price Growth: From 1995 to 2025, U.S. home prices increased by ~300%. Some markets, like California and Florida, far exceeded that.
Equity Gains: Even homeowners who eventually moved benefited significantly from long-term appreciation.
Leverage Advantage: A down payment gives you exposure to the full asset. That leverage multiplies returns over time.
Inflation Protection: Fixed-rate mortgages stabilize housing costs, unlike rent, which increased 176% over the last 30 years.
Refinance Flexibility: Homeowners in the last 30 years had multiple opportunities to refinance and reduce monthly payments.
Stability vs. Rent Volatility: While rent fluctuated, homeowners with fixed-rate mortgages maintained predictable housing expenses.
Lessons From Past Cycles
Yes, the market has had ups and downs. The 2006-2011 housing crash saw prices fall 28% from their peak. But those who bought in 1995 and held on ultimately recouped their equity—and more. Real estate rewards patience and strategy, not speculation.
GDP & Recession Outlook
The U.S. economy contracted by 0.3% in Q1 2025, driven largely by a spike in imports (ahead of expected tariffs) and a dip in government spending. While this isn't yet a technical recession, economists place the odds at 57% that we could see two consecutive quarters of negative growth this year.
However, the labor market tells a different story:
177,000 jobs were added in April, beating expectations.
Unemployment remains low at 4.2%, well below the historical average of 5.7%.
Still, beneath the surface:
Job growth has slowed to its lowest pace since 2021.
The gap between open roles and unemployed workers has narrowed significantly.
Layoff announcements are increasing, many tied to federal budget cuts.
Final Thoughts
The overall picture is mixed: solid job growth and consumer spending balance out concerns around inflation, interest rates, and affordability. For those thinking of buying, selling, or investing, the key takeaway is this:
Use this window wisely. Prices are more flexible. Inventory is rising. And financial tools like fixed-rate mortgages can help lock in long-term stability.
Now is the time to be strategic, not reactive.