The National Association of Realtors reported This Week in Real Estate that its Pending Home Sales Index (PHSI) declined by 6.3% in April compared to the previous month and fell 2.5% year-over-year, as rising mortgage rates and ongoing economic uncertainty continued to dampen demand. Meanwhile, the average 30-year fixed-rate mortgage edged up to 6.89% last week, a slight increase from 6.86% the previous week, yet still below the 7.03% recorded in the same period last year. The Commerce Department announced that the personal consumption expenditures price index, the Federal Reserve’s preferred inflation gauge, rose by a modest 0.1% in April, bringing the annual inflation rate to 2.1% – the lowest level in 2025, and approaching the Fed’s target rate of 2%. Following five consecutive months of declines, the Conference Board reported a notable improvement in U.S. consumer confidence in May, surging by 12.3 points from April to reach 98, significantly surpassing the Dow Jones consensus estimate of 86. Below are key events from the fourth week of May impacting our business:
TREASURY YIELD INCREASE DRIVES MORTGAGE RATES HIGHER IN MAY. Mortgage rates continued their upward trend in May due to market volatility triggered by fiscal concerns and weaker U.S. Treasury demand. According to Freddie Mac, the average 30-year fixed-rate mortgage rose to 6.82% – a 9-basis-point (bps) increase from April. The 15-year fixed-rate mortgage increased by 5 bps to 5.95%. Long-term treasury yields spiked following two events: first, a credit rating downgrade by Moody’s Ratings, and then, a tepid auction of the 20-year treasury. The weak demand for long-term government bonds necessitated a higher yield to attract investors. Read the full story here.
INFLATION IS ALMOST AT 2%. WILL THAT PROMPT A FED RATE CUT? The good news is the preferred measure of inflation for the Federal Reserve keeps trending downward. The bad news is that the economic backdrop that could lead to lower rates keeps getting more complicated. According to new data from the U.S. Bureau of Economic Analysis (BEA), the Personal Consumption Expenditures price index for April rose 2.1% on an annual basis, down from 2.3% in March and closer to the Fed’s target rate of 2%. So-called core inflation rose 2.5% year over year, the lowest annual rate so far in 2025. Housing costs remain the highest driver of consumer spending, with a rise of $24.7 billion on a seasonally adjusted annual basis. In a vacuum, the falling rate of inflation would signal that the Fed is ready to cut interest rates, as Chairman Jerome Powell has long said he wants to see inflation at 2% before doing so. But federal economic policy is a wild card that’s only getting wilder. The tariffs are widely expected to cause some level of inflation, and Powell has repeatedly signaled that it is taking that possibility into account when deciding on monetary policy. This means that the Fed may take a more cautious approach toward cutting interest rates. Read the full story here.
CONSUMER CONFIDENCE FOR MAY WAS MUCH STRONGER THAN EXPECTED. Consumer optimism got a much-needed boost in May. The Conference Board’s Consumer Confidence Index leaped to 98.0, a 12.3-point increase from April and much better than the Dow Jones consensus estimate for 86.0. “The rebound was already visible before the May 12 US-China trade deal but gained momentum afterwards,” said Stephanie Guichard, the Conference Board’s senior economist for global indicators. May’s rebound followed five straight months of declines. The present situation index increased to 135.9, up 4.8 points, and the expectations index posted a major surge to 72.8, a 17.4-point gain. Investors also showed more optimism, with 44% now expecting stocks to be higher over the next 12 months, up 6.4 percentage points from April. Views on the labor market also improved, with 19.2% of respondents expecting more jobs to be available in the next six months, compared with 13.9% in April. Read the full story here.
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