Hi Friends! 

The real estate market is always evolving, and this week, several key economic events could shape what’s ahead for homebuyers, sellers, and agents alike. If you’re wondering how inflation, interest rates, and consumer trends might impact housing affordability, here’s a breakdown of what to watch.

Monday – Trump’s “Reciprocal Tariff” Announcement

Tariffs might seem like a topic for economists, but they can have a big effect on real estate. When the cost of imported building materials rises, it can drive up the price of new construction, making homes even more expensive. However, without legislative approval or clear execution plans, the real impact remains uncertain. So, while the headlines may be dramatic, the real effects on housing are still up in the air.

Tuesday & Wednesday – Fed Chair Jerome Powell Speaks

Whenever the Federal Reserve talks about monetary policy, the housing market listens. If Fed Chair Jerome Powell signals that inflation is still a concern, mortgage rates could climb even higher—making it tougher for buyers to afford homes.

For now, the Fed seems to be in “watch and wait” mode, meaning rates are likely to stay where they are. However, any surprise announcements could shake up the market.

Wednesday – January Consumer Price Index (CPI) Report

This is the report that could have the biggest impact on mortgage rates. The CPI measures inflation, and if it comes in higher than expected, the Fed may need to keep rates elevated, which would keep borrowing costs high.

What we want to see? A lower-than-expected CPI report, which could help bring mortgage rates down and improve housing affordability.

Thursday – January Producer Price Index (PPI) & Jobless Claims

The PPI tracks what businesses are paying for goods and services, and if those costs rise, they’re usually passed on to consumers. At the same time, jobless claims give insight into the strength of the labor market. A strong job market generally supports housing demand, while rising unemployment could lead to a slowdown.

If both reports show economic weakness, it could push mortgage rates lower—but if they signal strength, borrowing costs could remain high.

Friday – January Retail Sales Data

Retail sales are a key indicator of consumer confidence. When people feel financially secure, they spend more—often on big purchases like homes. If sales are strong, it may suggest that buyers are still willing to spend despite high mortgage rates. However, if sales slow down, it could indicate growing caution about the economy.

One thing is clear: people are still out shopping, and their spending habits could influence housing trends in the months ahead.

What This Means for Homebuyers & Sellers

With multiple economic reports coming out this week, the housing market could experience some volatility. The CPI report is the most important to watch, as it will have the biggest impact on mortgage rates.

If you’re a homebuyer, staying informed about interest rates can help you make smart decisions about timing your purchase. If you’re a seller, understanding these trends can help you price your home competitively. And if you’re a real estate agent, now is the time to refine your strategy and communicate your value to clients in an evolving market.

Do You Really Need a Buyer’s Agent?

If you’ve been wondering whether a buyer’s agent is necessary, you’re not alone. It’s a question that comes up more and more in today’s digital age.

Here’s the truth: the best buyer’s agents do one thing exceptionally well—they get you the critical information needed to win in a competitive market.

This means:

• Understanding market trends and pricing strategies.
• Extracting key insights from listing agents.
• Knowing how to structure an offer to stand out.
• Negotiating effectively to get the best possible deal.

While it’s possible to submit an offer without an agent, many buyers who go this route end up losing out because they lack the insider knowledge needed to craft a winning bid.

Another thing to consider: being a buyer’s agent isn’t about convincing someone to buy—it’s about selling their offer to the seller’s agent. The best agents know how to position a buyer’s offer so that it’s the one that gets accepted.

In a competitive housing market, knowledge is power—and a great buyer’s agent ensures you have the upper hand.

The Affordability Crisis: Just How Bad Is It?

Housing affordability has reached historic lows, and the numbers are staggering:

• The annual income needed to afford a median-priced home is now $109,564—double what it was just four years ago.
• Meanwhile, the median household income sits at $83,431, creating a $26,000 gap between what’s needed and what most households earn.
• Back in 2006, at the peak of the last housing bubble, this gap was only $10,000.

California’s Housing Market: An Even Tougher Reality

If these numbers sound challenging, California’s situation is even more extreme:

• In many parts of the state, buyers need an annual income of $200,000+ to afford a home.
• The median household income in California is $80,000 to $90,000—meaning the affordability gap is far larger than the national average.

This makes homeownership increasingly out of reach for many Californians, especially first-time buyers.

What Needs to Change?

To return to pre-pandemic affordability levels, we would need one of the following:

A 60% increase in U.S. incomes (highly unlikely).

A 38% drop in home prices (also unlikely).

Mortgage rates to drop from 6.93% to 2.23% (very unlikely).

Since none of these scenarios seem probable in the near future, buyers will need stronger strategies, expert guidance, and market knowledge to navigate the challenges ahead.

Why Are People Waiting Longer to Buy?

In 1991, the average age of a first-time homebuyer was 28. Today, that number has jumped to 38.

While affordability is a major factor, lifestyle changes also play a role. Younger generations are prioritizing education, career growth, and travel before settling down.

With home prices and interest rates at record highs, the real question is: Is this just a temporary affordability issue, or have lifestyle preferences truly changed?

Final Thoughts: Where Is the Housing Market Headed?

With demand cooling, mortgage rates fluctuating, and affordability hitting record lows, the real estate market is facing serious challenges. However, the fundamental issue of low supply means that a major price drop is unlikely.

For buyers and sellers, staying informed is key. Whether you’re looking to purchase your first home or strategizing when to sell, understanding these economic trends will help you make the best decision.

What do you think? Are we heading toward a market shift, or is this the new normal?