| Tariffs – This was a wild month for both stock and bond markets. There were wild swings and at one point stock markets were headed for the worst April since the Great Depression before recovering to end the month slightly lower than they were at the start of the month. On April 2 President Trump in his “Liberation Day” speech announced tariffs on about 90 countries which panicked investors and markets worldwide. A full-scale sell-off began and stock markets plummeted, but recent developments have enabled the markets to recover much of those early losses. On April 9, following the initial sell-off, President Trump announced a 90-day pause on almost all countries except China. An all-out Trade war followed with China raising their tariffs to 125% on U.S. imports and Trump raising tariffs to 145% on all goods coming from China. Over the last two weeks, both sides have toned down the rhetoric as both countries have experienced a slowing in their economies. On April 12th President Trump exempted smartphones, computer monitors, chips, and various electronics from the 145% tariffs on Chinese goods. Administration officials have spoken about progress in trade negotiations. This has calmed investors from their initial panic. At month’s end, many administration officials including Treasury Secretary Scott Bessent said, “there was an opportunity for a big deal” on trade between the U.S. and China in his address to the Institute of International Finance. Last Friday, President Trump said that he had negotiated 200 trade deals that would be completed within three to four weeks. On April 28 auto tariffs were eased and a tax credit for auto manufacturers in the U.S. was proposed. Investors, world leaders, economists, and consumers are feeling better about tariffs than they were when the initial announcement was made on April 2nd as the administration has eased off on the size and scope of the tariffs.
Inflation and interest rates – Inflation subsided in March – The Consumer Price Index (CPI) rose 2.4% in March from one year earlier, down from a year-over-year increase of 2.8% in February. That matched the lowest annual inflation rate since last September, which was the lowest CPI rate since 2021. Core CPI, which excludes volatile food and energy prices, rose 2.8% year-over-year, down from a 3% annual rate in February. That marked the lowest yearly increase in Core CPI in four years. The Producer Price Index (PPI) rose 2.7% in March from one year earlier, down sharply from a 3.2% year-over-year increase in February. The PPI gauges wholesale inflation which is considered an indicator of future consumer inflation as wholesale costs are often passed on to consumers. The Personal Consumption Expenditures Price index, the Fed’s preferred measure of inflation rose 2.3% from one year ago. With inflation looking under control, it is unfortunate that mortgage interest rates and bond yields are so high. In September 2024, the CPI was at 2.4% and the unemployment rate was 4.2%. That marked the lowest inflation rate since early 2021 and the highest unemployment rate since 2021. The 10-year bond yield fell to 3.7% and the 30-year fixed mortgage rate dropped to just under 6%. After the election, inflation picked up and interest rates increased as investors and consumers felt that a change in administration would bring less regulation, and lower tax rates which in turn would boost the economy. Over the past couple of months, the economy has slowed. The latest GDP figure released on April 30th showed that the economy shrunk in the first quarter of 2025. It declined 0.3% from the previous quarter, its first quarterly decline since 2022. Normally lower inflation, slower growth, and higher unemployment would lead to lower interest rates. Today we are at the same unemployment rate, and CPI rate as we were last September, but instead of mortgage rates being just under 6% they are about 6.75%, and 10-year bond yields are about 4.2% rather than 3.7% they were when we had similar numbers last September. The only explanation is that investors fear that tariffs will reignite inflation, which would usually drop as the economy slows. Time will tell what will happen. There is a lot of uncertainty out there.
The graph below shows the CPI rate since 2021
Stock markets – The Dow Jones Industrial Average ended the month at 40,669.36, down 3.2% from 42,001.76 on March 31, 2025. The Dow is down 4.4% year-to-date. The S&P 500 closed the month at 5,569.06, down 1.6% from 5,661.85 on March 31, 2025. It is down 5.3% year-to-date. The NASDAQ closed at 17,446.34, up 0.8% from 17,299.29 on March 31, 2025. It is down 9.7% year-to-date.
U.S. Treasury Bond Yields – The 10-year U.S. treasury bond yield closed the month at 4.17%, down from 4.23% on March 31, 2025. The 30-year treasury yield ended the month at 4.66%, up from 4.59% on March 31, 2025. We watch bond yields because mortgage rates often follow treasury bond yields.
Mortgage rates – Every Thursday Freddie Mac publishes interest rates based on a survey of mortgage lenders throughout the week. The Freddie Mac Primary Mortgage Survey reported that mortgage rates for the most popular loan products as of May 1st, were as follows: The 30-year fixed mortgage rate was 6.76%, up from 6.65% in March. The 15-year fixed was 5.92%, up from 5.89% in March.
The graph below shows the trajectory of mortgage rates over the past year.
Home sales data is released on the third week of the month for the previous month by the California Association of Realtors and the National Association of Realtors. These are March’s home sales figures.
U.S. existing-home sales March 2025 – The National Association of Realtorsreported that existing-home sales totaled 4.02 million units on a seasonally annualized rate in March, down 5.9% month-over-month from an annualized rate of 4.26 million units in February. Year-over-year sales slipped 2.4% from an annualized rate of 4.12 million units. The median price for a home sold in the U.S. in March was $403,700, up 2.7% from $392,900 one year ago. There was a 4-month supply of homes for sale in March, up from a 3.2-month supply one year ago. First-time buyers accounted for 32% of all sales. Investors and second-home purchases accounted for 15% of all sales. All cash purchases accounted for 26% of all sales. Foreclosures and short sales accounted for 3% of all sales.
California existing-home sales – The California Association of Realtors reported that existing-home sales totaled 277,030 on an annualized basis in March, up 4.9% year-over-year from a revised 264,200 homes sold on an annualized basis. The statewide median price paid for a home was $884,370 in March, up 3.5% from $854,370 one year ago. There was a 3.5-month supply of homes for sale in March, up from a 2.6-month supply of homes for sale last March.
The graph below lists home sales data by county in Southern California.
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