Hi Friends, 

Last week, the bond market experienced significant turbulence as yields surged and investors rapidly sold off Treasuries, a sign of growing concern about the U.S. economy. The main driver? Ongoing tensions from the escalating U.S.-China trade war. With both nations engaging in retaliatory tariffs, market fears of inflation and a potential recession have increased. Though the Biden administration (following Trump’s legacy in trade policy) has recently paused some tariffs, uncertainty continues to ripple through global markets—affecting everything from mortgage rates to consumer goods.

Amid the geopolitical drama, there was a silver lining: new data showed that inflation may be cooling. In March, both consumer and producer price indices declined more than expected. Headline CPI dropped to 2.4% year-over-year, while core CPI hit a three-year low at 2.8%. Producer prices also fell sharply, suggesting that inflationary pressures are slowly easing as we head into spring.

However, the bond market remains volatile. The sharp rise in yields spooked the White House enough to trigger a pause on certain tariffs, highlighting how powerful bond markets can be in shaping policy. As James Carville famously put it: "I used to think I wanted to come back as the president or the pope... but now I want to come back as the bond market. You can intimidate everybody."

In real estate, mortgage application volume rebounded in early April, climbing 20% in a single week. Still, the overall pace of mortgage applications in 2025 remains sluggish compared to pre-pandemic levels. March applications were up just 4% year-over-year and remain about 40% below historical norms. January applications were even worse—down 14% from the year prior and over 50% below early 2020 levels.

Despite weak demand, mortgage originations are expected to grow. Total mortgage originations for 2025 are forecasted to hit $2.3 trillion—a 28% jump from 2024. Purchase loans are projected to total $1.46 trillion (up 13%), with about 6.5 million total mortgages expected this year. Refinance activity is also expected to tick upward to $502 billion as rates ease modestly.

So far in 2025, the average 30-year fixed mortgage rate has fluctuated between 6.62% and 7.04%. Analysts predict a gradual decline toward the 6.3%–6.7% range by year-end.

Homeowners continue to hold significant equity. Total U.S. mortgage debt now stands at $13.3 trillion, a 3.4% increase from last year. Meanwhile, U.S. homeowner equity has climbed to over $35 trillion, with the average homeowner holding approximately $266,000 in equity. Mortgages account for around 70% of all household debt in the U.S.

Meanwhile, fraud rates in mortgage applications remain historically low at 0.81%, and first-time buyers are increasingly turning to new construction homes due to limited existing inventory.

In California, the housing market has shown resilience despite economic headwinds. The state continues to outperform national trends, fueled by strong demand and low inventory. In February 2025, the median price for a single-family home hit $832,500, up 6% from the previous year. Condos and townhomes also saw price gains, with median values reaching $675,000. The California Association of Realtors expects the statewide median to reach $909,400 by the end of 2025—a 4.6% increase.

However, local markets vary. San Jose leads the way with double-digit growth, while San Francisco and Oakland are showing signs of price stagnation. Still, even in these cooler markets, low supply and high demand continue to support stable pricing.

Inventory is rising statewide, with nearly 89,000 homes on the market in February—a 24% increase year-over-year. New listings also rose 12%, and sales volume is on the rise. California home sales are projected to increase by 10.5% this year. The average home now sits on the market for 42 days, up from 35 days last year—signaling a more balanced pace.

Affordability, however, remains a challenge. Only 16% of California households can afford a median-priced home, a number that hasn’t improved since 2024. Nationwide, affordability is stronger, with 35% of households able to afford a median-priced home.

Nationally, the median home price in February was $425,061, with annual appreciation projected between 1.3% and 3.5%. Inventory across the U.S. has grown for 15 straight months, but it still hasn't returned to pre-pandemic levels. The national market is also seeing modest price gains and better affordability compared to California.

Demand has become more concentrated in affordable markets. Regions like Sacramento and parts of inland California are seeing a boost, thanks to relatively lower prices and continued migration from urban cores. Southern California remains steady, while parts of the Bay Area show a softening trend.

While recession concerns remain, the broader housing market continues to hold steady. Price growth is cooling to more sustainable levels, inventory is improving, and many buyers are slowly returning—especially as rates ease. For those waiting on the sidelines, this spring could offer a golden opportunity to purchase before competition ramps up.

For sellers, continued price strength and buyer activity offer solid conditions to list. And for real estate professionals, a stabilizing market means more room to build trust, provide value, and guide clients through what’s still a complex but promising environment.

Looking Ahead: What Should We Expect From Home Prices?

Owning a home is not only about having a place to live—it’s often a person’s largest financial asset. Historically, U.S. home prices have grown about 3.4% annually before inflation, and just 0.5% after adjusting for inflation. That means home price growth is typically modest over the long term.

Data going back to 1891 shows that home prices generally track inflation, with notable exceptions during the early-2000s housing bubble and the post-2012 pandemic-fueled surge. Recently, home prices have far outpaced inflation, but this trend is unlikely to continue as affordability remains stretched.

Going forward, home price growth will likely align more closely with inflation, unless we see a market correction. Still, homeownership remains one of the most consistent ways to build long-term wealth—not just through appreciation, but as a form of forced savings, stability, and financial security.

In short, the market is shifting—but not collapsing. With careful planning, there are still plenty of opportunities to buy smart, sell strong, and grow wealth through real estate in 2025 and beyond.