Tax Reform, Trade Tensions, and the Mortgage Market
The U.S. House narrowly passed a sweeping, 1,000+ page tax reform bill by just one vote (215–214). While final Senate approval is still pending, the immediate fallout has already rippled through capital markets.
Why does it matter?
Because the bill could significantly balloon the U.S. fiscal deficit, leading to increased Treasury borrowing. The market responded with a bond sell-off, which has already pushed mortgage rates higher.
➡️ As of today, the average 30-year fixed rate sits around 6.86%.
Meanwhile, President Trump has reignited global trade tensions by threatening new tariffs on Apple and the European Union, adding more volatility to the mix. Even after a brief truce with China, markets are reminded that a trade war escalation is always a tweet away.
Global uncertainty + budgetary chaos = a jittery bond market. And when bonds fall? Mortgage rates rise.
🏠 Real Estate Check-In: A Market Searching for Stability
It’s not just rates that are challenging the housing market—sales and inventory trends are shifting, too.
The Latest Data:
- Existing home sales fell another 0.5% in April, now down 40% from their 2021 highs.
- New home sales are down 1.9% year-to-date.
- Prices dropped 2% as builders work to move excess inventory.
- 504,000 new homes were on the market at the end of April—matching the 2007 housing peak.
- New construction now makes up 30% of total available homes, a notable rise from historical norms.
Builders are offering price cuts. But for buyers, affordability remains a major hurdle, especially as rates climb and wages stay flat.
Don’t expect rate relief just yet.
The Federal Reserve is still holding the line—watching inflation trends and job reports before deciding whether to adjust monetary policy.
📊 What to Watch This Week
A stacked week of data and commentary could impact everything from bond yields to mortgage locks:
- Durable Goods Orders: April saw a 6.3% drop (excluding transportation, a small +0.2% increase)
- Home Price Indices: Reports from FHFA and Case-Shiller
- Consumer Confidence: Gauging buyer sentiment
- Treasury Auctions: $183 billion in notes + $28 billion in 20-year FRNs
- Fed Watch: Speeches from Neel Kashkari and John Williams
- Q2 GDP Revision: Second look at how the economy is growing (or slowing)
Between Washington’s policy plays and Wall Street’s reactions, we’re looking at a market defined by uncertainty and acceleration.
For buyers: Lock in rates with a strategy. Don’t assume better pricing is around the corner.
For lenders: Communicate clearly. Your borrowers need context now more than ever.
For investors: Expect more swings. Political headlines are trading triggers, and the bond market is listening.
Now’s the time to stay informed, stay strategic—and stay ready.
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