According to the U.S. Department of Labor’s April Consumer Price Index (CPI) report released This Week in Real Estate, annual inflation has eased to its lowest level in over four years, with prices rising 2.3% year-over-year – down from 2.4% in March. This marks the slowest pace of inflation since February 2021. Despite this moderation, Federal Reserve Chair Jerome Powell on Thursday cautioned that long-term interest rates are likely to remain elevated due to persistent risks of inflation volatility. The Federal Reserve has maintained a pause on rate changes throughout 2025, following a cumulative 100 basis point reduction in the federal funds rate at the close of 2024. Analysts suggest that, barring significant economic disruptions such as tariff-related cost increases, the Fed may have room to implement additional rate cuts in the latter half of the year. Mortgage demand continues to strengthen. For the second consecutive week, purchase application volume increased – rising 2.3% from the previous week and nearly 18% compared to the same period last year. This marks the 15th straight week of year-over-year growth in mortgage activity, reflecting the impact of stabilizing mortgage rates and increased housing inventory in drawing prospective buyers back into the market. Below are key events from the second week of May impacting our business:
BETTER MORTGAGE SPREADS BOOST HOUSING DEMAND IN 2025. One of the lesser-known storylines in housing economics is that the improvement in mortgage spreads since 2023 has contributed to a noticeable trend in purchase application data for 2025, which is now showing 15 consecutive weeks of positive year-over-year growth. Mortgage spreads – the difference between the 10-year Treasury yield and the 30-year mortgage rate – are a complex topic. Mortgage spreads recently turned negative due to market volatility, which resulted in an increase of 20 to 25 basis points in mortgage rates. However, as the stock and bond markets have stabilized, mortgage spreads have improved. If we had not seen this improvement since the peak in 2023, we likely would not have experienced the growth in purchase applications this year. If the spreads were as bad now as they were at the peak of 2023, mortgage rates would currently be 0.75% higher. Conversely, if the spreads returned to their normal range, mortgage rates would be 0.55% to 0.75% lower than today’s level – that would mean nearly 6% mortgage rates. Read the full story here.
SINGLE-FAMILY STARTS DOWN ON ECONOMIC AND TARIFF UNCERTAINTY. Economic uncertainty stemming from tariff issues, elevated mortgage rates and rising building material costs pushed single-family housing starts lower in April. Overall housing starts increased 1.6% in April to a seasonally adjusted annual rate of 1.36 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. Within this overall number, single-family starts decreased 2.1% to a 927,000 seasonally adjusted annual rate and are down 12.0% compared to April 2024. On a year-to-date basis, single-family starts are down 7.1%. The three-month moving average (a useful gauge given recent volatility) is down to 991,000 units, as charted below. Single-family units under construction fell to a count of 630,000 – down 7.1% compared to a year ago. Overall permits decreased 4.7% to a 1.41-million-unit annualized rate in April. Single-family permits decreased 5.1% to a 922,000-unit rate and are down 6.2% compared to April 2024. Read the full story here.
MORTGAGE DEMAND FROM HOMEBUYERS CONTINUES TO RECOVER. Mortgage demand from homebuyers rose for the second straight week, suggesting that potential buyers are now more enticed by the increasing supply of houses for sale than they are dissuaded by recent economic uncertainty and concern over tariffs. Applications for a mortgage to purchase a home rose 2% for the week and were 18% higher than they were the year before. That was the second straight weekly gain after demand fell sharply for most of April. The previous week they rose by 11%. “The news for the week was the growth in purchase applications,” said Michael Fratantoni, chief economist for the MBA. “Despite the economic uncertainty, the increase in home inventory means there are additional properties to buy, unlike the last two years, and this supply is supporting more transactions.” He also noted a big gain in government purchase applications, up almost 5% for the week and 40% compared with a year ago. Government loans tend to be favored by lower-income or first-time homebuyers because they offer low down payment options. Read the full story here.
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