Last week highlighted the continued volatility in the U.S. housing market, with significant movements in rates, sales, and sentiment. Here's a quick breakdown of the key developments, brought to you by insights from the California Association of Realtors (C.A.R.):
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Mortgage Rates: Brief Retreat, But Pressure Remains: After climbing for three weeks due to factors like the U.S. credit rating downgrade and deficit-widening tax bills, mortgage rates dipped slightly last Friday. This followed President Trump's call for steep EU tariffs, which lowered Treasury yields (which rates track). However, with the announcement of a delay on those EU tariffs until July 9th, rates are expected to resume their upward trend this week. Bottom Line: Expect rate volatility to continue.
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New Home Sales: Unexpected Surge to 3-Year High: Defying expectations, new home sales jumped a strong 10.9% in April, reaching their highest level since February 2022 (743k annual rate). This surge, led by the Midwest and South, was likely fueled by aggressive builder incentives like mortgage rate buydowns and price reductions. High inventory levels suggest these incentives may continue.
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Labor Market: Mixed Signals: Initial jobless claims dipped slightly (227k), showing resilience. Notably, California saw a significant decrease in claims. However, continuing jobless claims remain near a 3.5-year high (1.903 million), indicating people are taking longer to find new jobs – a potential sign of a future slowdown.
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Builder Confidence Plunges: The NAHB/Wells Fargo builder confidence index fell sharply in May to its lowest level since late 2022. High interest rates and tariff concerns are major drags. Reflecting the pressure, 34% of builders cut prices in May (up from 29% in April).
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Small Business Optimism Wanes: The NFIB Small Business Optimism Index fell for the fourth straight month in April (95.8), remaining below its historical average. A cloudy economic outlook and difficulty filling jobs contributed to the decline, adding to concerns about the broader economy.
The Takeaway: The market remains defined by uncertainty. While builder incentives spurred a significant sales jump in April, high rates, tariff concerns, and mixed labor signals are weighing heavily on builder and small business confidence. Volatility, especially in mortgage rates, is likely to persist.
Stay informed on how these national trends impact California's unique market with the latest data and analysis from the California Association of Realtors (C.A.R.).
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