May 27, 2025 – Make Up Your Mind

Economic Commentary

We have this theory about the markets. The markets move sometimes with no rhyme or reason, but after the movement happens, we have high-paid analysts tell us why the markets made that movement. And they are very logical arguments – nothing like an alien spaceship was sighted. The next day the markets move in the opposite direction, and we have another post-movement explanation. And the cycle continues with the analysts earning their huge paychecks.

This year we have seen plenty of movement in the markets – both stocks and bonds. But this time the explanation is quite clear.  The announcement of tariffs caused the stock market to sink and every time there is a pause or a trade agreement, the stock market bounces right back. There is no need for expert analysis in this regard.  What is not so clear is the movement of interest rates in relation to the tariff news.

It appears interest rates were going down at the outset of the tariff announcement. This made sense because many were predicting that these tariffs could cause a recession. But then interest rates stopped going down because there was a fear that tariffs would increase inflation and, in combination with the slower economy, stagflation would result. But when progress towards an easing of the tariffs on China was announced, the stock market rallied, and interest rates rose.  Shouldn’t rates come down if there are fewer tariffs and less of a chance of increased inflation?  We are genuinely confused, and it appears so is the bond market. Certainly, the effect of tariffs on interest rates is not clear, and the lack of tariffs appear  to give us even less clarity.

Weekly Interest Rate Overview

The Markets. Mortgage rates rose in the past week as concerns over the budget deficit were in the forefront while Congress debated the massive budget bill. According to the Freddie Mac weekly survey, 30-year fixed rates rose to 6.86% from 6.81% the previous week. In addition, 15-year loans increased to 6.01%. A year ago, 30-year fixed rates averaged 6.94%, 0.08% higher than today. Attributed to Freddie Mac: “Mortgage rates inched up this week but continue to remain lower than one year ago. With more inventory for buyers to choose from than the last few years, purchase application activity continues to hold up.” 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

Owning a home remains a key goal for Gen Z. According to BMO’s Real Financial Progress Index, 69% of Gen Z adults consider homeownership a major life milestone. With savings stretched thin, many young buyers are turning to their 401(k) accounts. About 34% of Gen Z prospective buyers say they plan to use retirement funds to afford a home, a rate higher than any other generation. Family support remains essential. A majority of Gen Z and Millennial homeowners say they relied on financial help from relatives to afford a down payment or closing costs. Others are exploring digital solutions like fractional real estate investing. According to the investment platform Arrived, 87% of Gen Z respondents believe real estate is key to wealth building. The company reports that 58% of users born after 2000 begin with investments of $100 or less. “The data show that owning a home remains a key component of the American Dream,” said Paul Dilda, head of US consumer strategy at BMO. “But with some obstacles still facing first-time homebuyers, younger generations worry they missed their moment.” Even as they rewrite the financial playbook, Gen Z continues to pursue homeownership – not as a fading ideal, but as a future they are working to reshape. Source: Mortgage Professional America

The majority of housing markets tracked by NAR posted median home price increases in the first quarter, with many hitting all-time highs. Homeowners are the clear winners in the housing market, continuing to experience strong appreciation as home prices remain on a steady upward march nationwide. Some markets are still seeing double-digit gains. “Most metro markets continue to set new record highs for home prices,” says NAR Chief Economist Lawrence Yun, noting that more than 80% of metro areas saw home price increases in the first quarter. Compared to one year ago, the national median price for existing single-family homes rose 3.4% to $402,300, NAR reports. In the previous quarter, the year-over-year increase was nearly 5%, indicating that while prices are still climbing, the pace of growth has slowed somewhat. The Northeast is seeing some of the highest home price increases over the past year, with prices up 10.3% annually, according to NAR’s report. That’s followed by a 5.2% year-over-year gain in the Midwest and a 4.1% increase in the West. While the South accounted for the largest share of existing home sales in the first quarter, it posted the slowest annual price appreciation, rising just 1.3% by comparison.  “It’s still a very good time to be a homeowner,” Yun says. “About 88 million homeowners across the country are consistently smiling because they’re seeing a large home price gains. This is a sizable wealth gain at a time when the stock market has undergone some volatility.”  Source: National Association of Realtors

A recent report released by the National Association of Hispanic Real Estate Professionals sheds light on the state of Hispanic homeownership in America in 2024. Drawing from both publicly available data and insights from real estate practitioners within the NAHREP network, the report aims to tell the evolving story of Hispanic homeownership. It highlights key trends in homeownership growth, including barriers, opportunities, and cultural nuances influencing Hispanic consumers. These insights help shape NAHREP’s policy priorities for legislative and administrative actions, while guiding industry efforts to reduce barriers and expand homeownership opportunities.  Despite rising home prices and high interest rates, the number of Hispanic homeowners in the U.S. reached a record 9,781,000 in 2024—representing 49% of all Hispanic households. Although this figure is slightly below the 49.5% reported in 2023, it reflects a net gain of 238,000 new Hispanic homeowners over the past year.  These 238,000 new homeowners accounted for 35% of the nation’s total net growth in homeownership, a disproportionately high share compared to the overall Hispanic population, which makes up approximately 15% of U.S. households. This means Hispanics are punching above their weight in driving homeownership growth.  Despite accounting for only 36% of total households, non-white households represented 82% of all new household formations in the United States. This indicates the increasing importance of multicultural segments in shaping the future housing market.  Source: NAR