Tariffs and Real Estate: How Trade Policy Is Shaping Market Conditions

This week, investor attention turned toward global trade developments, particularly the impact of newly announced tariffs. While the economic data had minimal effect on markets, increased trade tensions led to a drop in mortgage rates, which ended the week at their lowest levels since October.

Tariffs Fuel Uncertainty but Ease Mortgage Rates

On Wednesday, President Trump announced an increase in tariffs on many countries, prompting an immediate response from China, which raised tariffs on U.S. goods. Although higher tariffs typically lead to higher prices and added inflation, investors believe the broader impact will be slower global economic growth, which tends to reduce long-term inflationary pressure. This outlook supported lower mortgage rates.

For real estate, falling mortgage rates improve affordability and can encourage more buyers to enter the market. However, ongoing trade tensions may lead to economic uncertainty, making it essential for both buyers and sellers to remain informed and act decisively when favorable rates are available.

Job Growth Beats Expectations but Wages Cool Slightly

The March Employment report showed strong job gains, with the economy adding 228,000 positions—well above the forecast of 140,000. The health care, retail, and transportation sectors led the way. Interestingly, the unemployment rate ticked up slightly to 4.2 percent, while wage growth slowed to 3.8 percent annually, down from 4.0 percent the month prior.

For the housing market, steady job growth supports buyer confidence and purchasing ability. Slower wage growth may help keep inflation in check, which could contribute to more stable mortgage rates. Sellers can benefit from a labor market that continues to provide income stability for potential buyers.

Service Sector Outperforms Manufacturing

Two reports from the Institute of Supply Management showed mixed results. The national services index dropped to 50.8, missing expectations and hitting its lowest point since June 2024. Meanwhile, the manufacturing index fell to 49.0, signaling continued contraction. Despite the declines, the service sector remains in expansion territory and continues to outperform manufacturing.

For real estate, strength in the service sector suggests ongoing demand in urban and suburban areas where service jobs are concentrated. However, weakness in manufacturing could affect housing markets tied to industrial employment. Buyers and sellers should consider local economic conditions when evaluating opportunities.

Fed Signals Patience Amid Trade Uncertainty

In a speech on Friday, Federal Reserve Chair Jerome Powell acknowledged the uncertain economic outlook created by the new tariff policies. He explained that it is unclear whether tariffs will cause a one-time rise in prices or create ongoing inflation pressure. Because of this uncertainty, Powell emphasized that the Fed will wait to assess the full impact before deciding on any changes to interest rates. Investors currently expect a rate cut in June.

For buyers, the possibility of future rate cuts and already lower mortgage rates may present a unique opportunity to secure more favorable financing. Sellers could see increased interest in the coming months if rates drop further, but market unpredictability may require flexible pricing strategies.

What This Means for Real Estate

Global trade developments and shifting monetary policy continue to influence mortgage markets. For buyers, now may be a good time to take advantage of lower rates before additional economic changes take hold. Sellers can benefit from improved affordability for buyers but should stay alert to potential shifts in buyer sentiment driven by economic uncertainty.

Remaining informed about evolving policies and market conditions is key to making smart real estate decisions. Whether you are looking to buy or sell, understanding the broader economic context will help you navigate the market with confidence.

Contact us today to discuss how these factors could influence your next move in the housing market.