LOS ANGELES REAL ESTATE REPORT

Inflation Eases: A Confusing Week for Rates and What It Means for Real Estate

​

This week brought a mix of signals for mortgage markets. While inflation data came in much lower than expected, a typically positive development for mortgage rates, other factors, including ongoing tariff uncertainty, led to a sharp rise in rates by the end of the week.

​

Tariff Pause Brings Volatility, Not Clarity

​

On Wednesday, President Trump announced a 90-day pause on higher tariffs for most countries, allowing time for further negotiations. However, tariffs on China will still be raised significantly. Despite what seemed like encouraging news, bond yields spiked on Thursday and Friday. The reasons remain unclear, but speculation includes concerns that China may sell U.S. bonds in retaliation or that foreign investors are pulling out of U.S. assets due to growing uncertainty.  For real estate, the surprise increase in mortgage rates, even amid positive inflation news, adds complexity to market timing. Buyers may need to act quickly when rates dip, while sellers should remain flexible as shifting rates influence buyer activity.

​

Consumer Price Index Offers Encouraging News

​

The Consumer Price Index, one of the most closely watched inflation indicators, showed clear signs of easing. In March, core Consumer Price Index, excluding food and energy, was 2.8 percent higher than a year ago, well below forecasts and the lowest annual rate since March 2021.  For homebuyers, easing inflation is typically a signal of more stable mortgage rates and improved affordability. However, this week’s rate spike shows that global events can override expectations. Sellers should keep in mind that buyer budgets may still be squeezed by unpredictable interest rate swings.

​

Shelter Costs Remain Sticky, While Other Prices Fall

​

Despite progress on inflation overall, housing costs remain a persistent challenge. Shelter expenses continue to be one of the main reasons the Fed has struggled to reach its 2.0 percent inflation target. That said, prices for airline fares, prescription drugs, and used vehicles dropped sharply in March.  For real estate, rising shelter costs reinforce demand for homeownership as buyers look for stable housing options in a rising rent environment. Sellers may benefit from this demand, but should be cautious of setting prices too aggressively in a volatile rate environment.

​

Producer Prices Add to the Positive Inflation Trend

​

The core Producer Price Index, which tracks wholesale prices, fell by 0.1 percent in March, far below expectations for a 0.3 percent increase. On a year-over-year basis, it rose just 3.3 percent, a modest improvement from the prior month. While not as influential as the Consumer Price Index, the Producer Price Index supports the trend of easing inflation.  For real estate, declining producer prices could eventually help control construction and renovation costs, potentially making new homes more affordable. Buyers and sellers should both watch for how these cost trends impact supply and demand in their local markets.

​

What This Means for Real Estate

​

It was a week of mixed messages for mortgage markets. Inflation data suggested lower rates, but global uncertainty pushed them higher instead. For buyers, this is a reminder to stay alert and be ready to act when mortgage rates move in their favor. Sellers may still benefit from strong demand, but should approach pricing with an understanding of how rate fluctuations affect buyer affordability.

​

Staying informed on both economic data and international developments is essential in today’s market. Whether you are planning to buy or sell, knowing how these forces interact will help you make more confident real estate decisions.