July 1, 2025 – A Stark Reminder

Economic Commentary

As we look at the effect of tariffs, the pending tax bill, the jobs report, retail sales, inflation data and a host of other economic indicators, a few weeks ago we received a stark reminder of why the preponderance expert predictions could be for naught. And it was not unusual for that reminder to come directly from the Middle East region of the world. The latest battles between Iran and Israel have the potential to change the world economy in a way that all previous bets are off. Or the battles could quiet down and have no lasting effect.

Whether it is a war, a natural disaster or another surprise occurrence, we are used to weathering abrupt changes in our lives which affect the economy significantly. Certainly, the pandemic was a prime example of such an occurrence. Predictions are typically a shot in the dark, but when you add major unforeseen variables, the exercise can be futile. Just looking at one factor such as oil prices demonstrates the dilemma.  On one hand, we could see the Strait of Hormuz closed for a time, sending oil prices skyrocketing. On the other hand, this battle could lead to lasting peace which brings more Iran oil to the markets – quite the opposite. 

Meanwhile, we can’t forget about the economic data in front of us.  Last week we saw readings on personal spending, the PCE inflation index and more. The big data comes this week in the form of the jobs report.  Two weeks ago, we experienced a very weak retail sales report showing that consumers were hesitant to spend. If the jobs picture also weakens, it is likely we will see lower mortgage rates on the horizon, regardless of whether the Federal Reserve lowers short term interest rates.

Weekly Interest Rate Overview

The Markets. Mortgage rates continued to ease in the past week. According to the Freddie Mac weekly survey, 30-year fixed rates eased to 6.77% from 6.81% the previous week. In addition, 15-year loans decreased to 5.89%. A year ago, 30-year fixed rates averaged 6.86%, slightly higher than today. Attributed to Freddie Mac: “Borrowers should find comfort in the stability of mortgage rates, which have only fluctuated within a narrow 15-basis point range since mid-April. Although recent data show that home sales remain low, the resulting available inventory provides homebuyers with a wider range of options to consider when entering the market. Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Real Estate News

According to a recent Redfin survey, there are $698 billion worth of properties for sale in the U.S., which is the greatest dollar amount ever and up 20.3% from a year ago. The examination of Redfin.com listings dating back to 2012 served as the basis for the report. Redfin added up the list prices of all active U.S. listings as of the last day of each month to determine the total dollar value of all inventory on the market; the most recent month for which data is available is April 2025. In the study, “value” and “list price” are synonymous; that is, when the term “total home value” is mentioned, referring to the total of all list prices. “A huge pop of listings hit the market at the start of spring, and there weren’t enough buyers to go around,” said Matt Purdy, a Redfin Premier agent in Denver. “House hunters are only buying if they absolutely have to, and even serious buyers are backing out of contracts more than they used to. Buyers have a window to get a deal; there’s still a surplus of inventory on the market, with sellers facing reality and willing to negotiate prices down.” Due to a combination of rising home-sale prices, slowing demand, and expanding inventory, the total value of U.S. home listings is at an all-time high. Source: Redfin

The share of homebuyers using cash instead of financing using a mortgage has come down somewhat this year. Some 30.7% of home purchases in April were all-cash transactions, down from 31.6% in April 2024 and down from nearly 35% in 2023.  The all-cash share of home sales has declined as interest rates on mortgages fell from a peak of 7.76% in November 2023 to an average of around 6.75% this year.  Even investors, who typically pay with cash, have increasingly turned to mortgages. Some 62.3% of home purchases by investors in 2024 used all cash, the lowest share since 2008, according to Realtor.com. The firm said the demographics of home investors are shifting toward smaller investors that rely on mortgages rather than cash. Source: Inside Mortgage Finance

According to a Realtor.com survey, foreign home buyers accounted for 1.9% of Realtor.com’s internet traffic in the first quarter of 2025, compared to 1.7% in the same period in 2024, indicating that foreign demand accounted for a higher portion of U.S. housing demand. The demand from Canada, the leading source of overseas home shopping to the United States, decreased from 40.7% in Q1 of 2024 to 34.7% in the first quarter of 2025, despite this overall gain. “While international demand for U.S. housing was a growing share of total demand, the drop from potential Canadian shoppers underscores the impact of recent trade policies on cross-border real estate interest,” said Danielle Hale, Chief Economist, Realtor.com. “While coastal magnets like Miami, New York, and Los Angeles continue to attract global buyers, the growing appeal of Texas markets to international buyers signals a noteworthy regional shift in investment focus, potentially driven by economic factors and business-friendly environments.” Canadian home shoppers account for 34.7% of overseas traffic this year, despite a change from 2024. They are followed by shoppers from the UK (5.7%), Mexico (5.4%), Germany (3.8%), and Australia (3.2%). Miami accounted for 8.7% of all worldwide demand in the U.S. in the first quarter of 2025, making it the most popular market for foreign consumers. New York, Los Angeles, and Orlando, Florida were next in line. Source: Realtor.com