Tariffs and Inflation Data: Competing Forces Keep Mortgage Rates Steady

It was a volatile week for mortgage markets, as headlines shifted between easing trade tensions and fresh inflation data. While the week began with rising bond yields due to optimism about global growth, softer-than-expected inflation figures helped mortgage markets recover. In the end, mortgage rates finished the week nearly unchanged.

Tariff Pause Boosts Growth Outlook but Raises Inflation Concerns

On Monday, officials from the United States and China announced a ninety day pause on most new tariffs, temporarily easing a growing trade dispute. This news lifted expectations for global economic growth, helping stocks rally. However, it also increased concerns about future inflation, as stronger growth can put upward pressure on prices. For mortgage markets, the inflation risk outweighed the growth optimism, causing bond yields to rise.For real estate, the pause in tariffs may support economic confidence, which helps maintain housing demand. But if inflation picks up again, mortgage rates could climb, affecting affordability for buyers and strategy for sellers.

Core Inflation Remains Tame Despite Tariff Activity

The Consumer Price Index showed core inflation rose 2.8 percent in April from one year ago, slightly below forecasts and remaining at its lowest level since March 2021. Although this is well below the peak of 6.6 percent in September 2022, it is still above the Federal Reserve’s 2.0 percent target. Shelter costs continue to weigh on the index, while used vehicle prices declined again and new vehicle prices remained flat.For buyers, easing inflation is a positive sign, as it supports stability in mortgage rates. Sellers may benefit from improved affordability, though continued high shelter costs show that affordability challenges remain, particularly for first-time buyers.

Producer Prices Fall Sharply

The core Producer Price Index, which measures wholesale costs, declined 0.4 percent in April from March, significantly under the expected increase of 0.3 percent. On a yearly basis, producer prices rose 3.1 percent, down from 3.3 percent in the previous month. While this data receives less attention than the Consumer Price Index, it still reinforces the idea that inflation pressures may be softening.For real estate, lower producer prices could help control construction costs and home improvement expenses, supporting more favorable pricing in the new home market. Buyers and sellers should continue to track these trends as they shape supply and pricing dynamics.

Retail Sales Surge Then Settle

Retail sales jumped 1.7 percent in March as consumers rushed to buy before expected price increases from new tariffs. In April, activity returned to normal with a 0.1 percent increase, matching expectations. Strength was concentrated in home improvement and electronics, while sporting goods and department stores saw declines.For the housing market, strong sales at home improvement stores suggest continued investment in home projects, which can support resale value and buyer interest. A return to normal spending levels also signals stability in household budgets, which is positive for sustained housing activity.

What This Means for Real Estate

This week highlighted the delicate balance between inflation risks and economic optimism. For buyers, steady mortgage rates and cooling inflation offer a window to make competitive offers with greater confidence. For sellers, strong pricing remains within reach, but attention to market shifts will be key to keeping properties attractive in a dynamic environment.

As global and domestic conditions continue to evolve, staying informed is essential. Whether buying or selling, understanding the economic backdrop ensures you are well positioned to succeed. Let me know if you would like this adapted for your local market or client audience.