Weekend Talking Points - 'Wild'

It was a wild, wild week, with stock and bond markets moving violently up and down in response to the Trump tariffs, China’s retaliation, and growing recession fears. But let’s bring it back to real estate, where the spring inventory increase is underway! Buyers have more options today than they’ve had in several years. Will the affordability crisis kill another spring selling season?

It’s hard to explain. Talking Points is meant to be an update on real estate news, but I can’t not talk about the tit-for-tat tariffs because they directly affect inflation, the economy, the cost to build a new home, the Fed’s policy rate decisions, risk-on/risk-off trades, bond yields and mortgage rates! So bear with me while I attempt to summarize a wild, wild week.

• April 2 — After markets closed, President Trump unveiled a new “base tariff” of 10% and “discounted reciprocal” tariffs that went as high as 90% (for Vietnam). China was hit with an additional 34% tariff. Note: Canada and Mexico were excluded from these new tariffs, because they already got hit with their own special tariffs a few weeks earlier.

April 3 market reaction
Yield on 10-Yr US Treasury Bond: -8 basis points to 4.05%
NASDAQ Composite Index: -6% to 16,551

• April 4 — China retaliated with a 34% tariff on US goods, effective April 10.

Yield on 10-Yr US Treasury Bond: -2 bps to 4.01%
NASDAQ Composite Index: -3% to 15,558

• April 7 — President Trump threatened an additional 50% tariff on China if they didn’t back down on their April 4 tariff plans.

Yield on 10-Yr US Treasury Bond: +10 bps to 4.19%
NASDAQ Composite Index: +5% to 15,603

• April 9 — With China refusing to blink, the US raised its tariffs on Chinese goods to 104% (!!!), and China promptly raised their tariffs on US goods to 84%. But…then the US announced that the implementation of the “discounted reciprocal” tariffs from April 2 would be delayed by 90 days (for all countries except China) to give time for these countries to negotiate “deals”.

Yield on 10-Yr US Treasury Bond:+7 bps to 4.37%
NASDAQ Composite Index: +11% to 17,001

After all that, the NASDAQ Composite Index is now only 3.5% below where it was at the end of the day on April 2 (pre-tariffs). However, the yield on the 10-year US treasury is 38 basis points higher and average mortgage rates are (once again) at 7%! [MBS Highway, Bloomberg]

Signs of spring. The March 2025 update to the Realtor.com residential listing database was pretty encouraging. The number of active listings rose 5% MoM to 893,000 (that’s +28% YoY). After (what I would call normal) seasonal price declines in the fall/winter, the median listing price rose 3% MoM to $424,900. New listings were up 10% MoM to 436,000 (+23% YoY) and pending listings were up 12% MoM (roughly flat with March 2024). [Realtor.com]

Cotality! CoreLogic has a new name and it’s awful. It sounds like the grisly finishing moves in Mortal Kombat. But back to their data. In January, Cotality predicted flat home prices for February 2025. Well, they actually came in +0.3% month-over-month, flummoxing the forecaster and causing Cotality to raise their next 12 months forecast for home price growth from 3.6% → 4.2%. [Cotality]

TP: You may recall a similar thing happened with the Case-Shiller numbers for January, which really started 2025 out with a bang (+0.6% MoM).

Fifteen years in the home you just bought? In 2024, homebuyers surveyed by the National Association of Realtors said that they expected to stay in their home a median of 15 years. Just a few years ago, that figure was 10 years! What’s changed? Higher home prices and mortgage rates have encouraged people to stay put, yes. But also: there were fewer younger buyers in 2024 (who tend to move homes more often). [NAR]

TP: As soon as mortgage rates come down, there will be a rush of younger, first-time buyers. This will naturally lead to this figure coming down.

Condo-lessa Price. I’m tremendously proud of that pun. With lots of supply (and more coming) and demand limited by high prices, high mortgage rates, skyrocketing insurance premiums & soaring HOA dues, condo prices are under pressure in several large markets. Redfin said that 68% of condos sold for less than their listing price in February — the highest share in five years.

CPI dropped significantly…and no one cared. Big improvements! March “Headline” CPI (Consumer Price Index = inflation for you and me) fell 0.1% MoM, which meant that annual “headline” CPI declined from +2.8% YoY → +2.4% YoY. “Core” CPI, meanwhile, rose only 0.1% MoM which allowed annual “core” CPI to drop from +3.1% YoY → 2.8% YoY.

TP: Any other week and this CPI result would have bond prices soaring and bond yields (and by extension, mortgage rates) falling. But the market is too focused on Trump and tariffs to pay attention to CPI.

Mortgage Market

We just can’t manage to keep mortgage rates lower for very long. Something always happens. In this case, it looks like a combination of the risk-off trade (selling stocks to buy bonds, pushing yields lower) reversing & something like a liquidity squeeze prompting investors to sell US treasuries. To be honest, I don’t know. But I was looking forward to a spring selling season with mortgage rates near 6.5% and now we’re at 7.0% again. Sigh.

Here’s what the Fed Funds Rate futures market is currently pricing in for rate cuts. Note that the current Fed Funds Rate policy range is 4.25–4.50%.

• May 7 FOMC Meeting: 78% probability that the policy rate will remain at 4.25–4.50% (down from 88% last week)! 22% probability of a 25 bps cut (25 bps = 0.25% = a quarter percentage point) to 4.00–4.25%.
• June 18 FOMC Meeting: 17% probability that the policy rate will remain at 4.25–4.50% (down big from 34% last week). 66% probability that the policy rate will be 25 bps below current (which implies one rate cut on either May 7 or June 18). 17% probability that rates will be 50 bps below current

They Said It

“The Florida condo market is in uncharted territory. We’re seeing a massive influx of condo inventory because a lot of senior citizens on fixed incomes can no longer afford their monthly payments, and a lot of other condo owners just want to move because they’re tired of dealing with rising HOA fees and special assessments.” — Tim Harper, Redfin real estate agent

‍