Author: Eric BernsteinPublished:
Last week was a good one for homebuyers. Mortgage rates moved lower as PCE inflation came in slightly better than feared month-to-month, keeping rate-cut hopes alive. Home price data also showed the market continuing to cool, with national prices barely rising and several major markets posting annual declines. For buyers, that’s the right mix: lower rates, slower price growth, and more room to negotiate in softer markets like Austin, parts of Florida, and California.
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Homebuyers Nationwide Finally Get Some Leverage
Home prices nationwide are finally giving buyers a little breathing room. The latest Case-Shiller report showed national home prices up just 0.7% year-over-year in March, with more than half of the major markets posting annual declines.
Texas continues to soften, with Dallas down 1.7% and Austin likely seeing even more buyer leverage as inventory builds.
California is mostly flat to slightly down, with Los Angeles off 1.6% while San Diego and San Francisco barely rose.
Florida is split — Miami is still holding up, but Tampa is down nearly 2%.
The Northeast remains the exception, especially in parts of New Jersey and Connecticut, where tight inventory is still keeping competition strong and giving sellers the upper hand.
For buyers, the big takeaway is positive: prices aren’t running away anymore, sellers are more willing to negotiate, and in markets like Austin, parts of Florida, and California, buyers finally have more room to push for discounts and concessions.
That said, this is still a city-by-city, state-by-state, and national view — not a guarantee of what’s happening on every block. Real estate is hyper local. We’re seeing homes sit for months in one neighborhood, while nearby homes in a more desirable pocket get multiple offers as soon as they hit the market.
PCE Inflation Report Comes in As Expected
PCE inflation came in hot on an annual basis but slightly better than feared month-to-month, giving markets a mixed read. Headline PCE rose 0.4% in April and 3.8% year-over-year, the highest annual reading since 2023, while core PCE — the Fed’s preferred inflation gauge because it strips out food and energy — rose 0.2% for the month and 3.3% from a year ago. The good news is that the monthly readings were a little softer than expected, which suggests the recent burst of price pressure may be easing. The bad news is that inflation is still running well above the Fed’s 2% target, with energy prices, tariffs, housing, and services all keeping pressure on consumers. In other words, this report didn’t scream “rate hike,” but it also didn’t give the Fed enough comfort to start cutting anytime soon.
Fed Officials Split on What Comes Next
Fed officials who spoke after the report all agreed inflation is still too high, but they differed on how much patience the Fed should show. It is worth noting, though, that none of Trump’s more rate-cut-focused Fed nominees have spoken publicly since the report came out, so the commentary so far has mostly come from officials who are still more cautious on inflation.
Michelle Bowman was the most willing to look through the report, arguing that higher energy prices and tariff effects may prove temporary and that rate cuts should remain on the table if inflation cools again.
Jeff Schmid took the opposite view, saying inflation has been above target for too long and the Fed needs to keep the option of higher rates open if price pressures stay hot.
Neel Kashkari landed in the middle: he said it is too early to conclude rates need to rise, but the Fed should keep watching the data and the Middle East conflict before making any move.
Alberto Musalem also leaned cautious, warning that the Fed should not cut rates based on the hope that AI-driven productivity will eventually bring inflation down. His message was simple: inflation is still too high, the labor market is stable, and the Fed should stay focused on restoring price stability.
What to expect this week?
This is a big week for rates, and it’s mostly about the labor market. After last week’s heavier reporting, markets now get a packed week of jobs data, Fed speakers, and a few economic reports that could move mortgage rates one way or another. Expect volatility.
Monday starts with manufacturing data and construction spending.
Tuesday brings job openings, one of the first big labor reports of the week. The forecast is 6.9 million openings, matching the prior month. A weaker number would suggest the job market is cooling and could help rates move lower. A stronger number could do the opposite.
Wednesday is busy. ADP employment is expected to show 120,000 private payroll jobs added in May, up from 109,000 previously. We also get services PMI, factory orders, ISM services, and the Fed Beige Book.
Thursday brings initial jobless claims, productivity data, and a speech from Richmond Fed President Tom Barkin. Jobless claims are expected to stay at 215,000. Claims have been one of the cleaner weekly reads on whether the labor market is starting to crack, so any surprise here could move rates.
Friday is the main event. The May jobs report comes out before markets open, with expectations for 90,000 new jobs and unemployment holding at 4.3%. Wage growth will also be key, with hourly wages expected to rise 0.3% for the month and 3.4% year-over-year. If job growth or wages come in hotter than expected, mortgage rates could move higher. If the report shows a softer labor market, rates could get some relief. Either way, Friday has the potential to be the biggest market mover of the week.
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