John's Finance Corner: Navigating Economic Uncertainty

As mortgage professionals, we keep a close eye on economic indicators that shape borrowing costs, home affordability, and market demand. Last week’s data presented a mixed bag of trends, with the labor market showing signs of slowing, inflation cooling, and home prices continuing their steady climb. Here's what it all means for mortgage rates and market conditions moving forward.

Labor Market Trends: Strong Headlines, but Hidden Weaknesses

The Bureau of Labor Statistics (BLS) reported 177,000 new jobs in April, exceeding expectations and keeping the unemployment rate at 4.2%. While politicians and media outlets quickly celebrated the report, it’s critical to recognize BLS job data is often overstated, with downward revisions following in the next month. We’ve already seen this trend in the first quarter of 2025:

• January’s job creation was revised lower by 32,000
• February dropped by 49,000
• March fell by 43,000

If April follows suit, the actual job numbers may land below forecasts, signaling a weakening labor market rather than true strength. This is significant for mortgage rates, as a cooling job market could eventually lead to Federal Reserve policy shifts, impacting rate expectations.

Inflation & Shelter Costs: What Homebuyers Should Know

The Personal Consumption Expenditures (PCE) Report, the Fed’s preferred inflation measure, showed promising signs:

• Headline inflation remained flat month-over-month
• Year-over-year inflation dropped to 2.3%, down from 2.7%
• Core PCE sits at 2.6%, inching closer to the Fed’s 2% target

However, one of the biggest components of inflation—shelter costs—lags reality by about 13 months. This means the official numbers do not yet reflect the significant drop in real-time rental prices. Given current rental trends, future PCE readings should show lower inflation rates, which may support the case for rate reductions down the road.

Home Prices: Values Continue to Rise Despite Volatility

Two respected home price indices revealed continued appreciation across most markets:

• The Case-Shiller Home Price Index reported a 0.3% increase from January to February, with 3.9% growth year-over-year.
• The FHFA House Price Index showed a 0.1% monthly gain, matching a 3.9% annual increase.

Despite some localized price corrections, the broader market remains resilient, with home values continuing to climb. A decline in mortgage rates could trigger stronger demand, pushing home prices even higher.

Mortgage Rates & Bond Market: Expect Volatility

The bond market has been on a roller coaster over the past 30–45 days, with uncertainty creating wild swings in mortgage pricing. As government policies evolve and economic data drives investor sentiment, we should brace for continued fluctuations in rates.

In this environment, education and communication are key. Mortgage professionals and Realtors who help clients understand the economic landscape will stand out in an increasingly complex market. Whether guiding buyers through rate volatility or advising sellers on pricing strategies, knowledgeable professionals will be the difference-makers in today’s uncertain economy.

John Lamberg

MORTGAGE LOAN ORIGINATOR

NMLS 189233