April 28, 2025 – The U.S. economy continued to show mixed signals as housing, labor, and consumer sectors navigated rising uncertainty. New home sales unexpectedly surged to a 724,000 annual rate fueled by a temporary dip in mortgage rates, though new tariffs and higher construction costs pose risks ahead. In California, housing affordability continued to decline, with gaps between ethnic groups narrowing but remaining wide in 2024. Nationally, the labor market remained resilient despite slight increases in jobless claims and signs of caution in business investment, particularly in tariff-exposed sectors. Meanwhile, consumer sentiment fell sharply to near-historic lows, reflecting heightened fears of inflation and recession. In regard to the housing market, although supply rose significantly statewide, overall sales remained subdued and will likely stay low as elevated mortgage rates and economic uncertainty continue to weigh on market activity in the near term.

New home sales climb despite economic uncertainty and mortgage rate volatility: New home sales jumped more than expected in March and had the strongest performance since September 2024, as buyers responded to a temporary dip in mortgage rates. The increase occurred despite prevailing economic uncertainty and elevated interest rates, which might have applied some downward pressure on home prices as the median sales price declined 7.5% from a year ago to $403,600. The improvement in transactions primarily took place in the South (+22.3%), as the North-east (-33.3%), the Mid-West (-15.9%), and the West (-12.2%) all dipped in sales from a year ago. Inventory also increased with for sale properties rising 7.9% annually to 503,000 units, offering greater choice for buyers. However, this momentum may face headwinds in coming months as new tariffs put upward pressure on construction costs, and builders have already signaled a slowdown in housing starts at the end of the first quarter.

Homeownership slips further out of reach for all California ethnic groups amid rising mortgage costs: In 2024, housing affordability in California deteriorated further across all ethnic groups, reflecting the compounding effects of elevated mortgage rates and stagnant income growth relative to soaring home prices. Only 18% of Californians could afford the state’s median-priced single-family home, valued at $865,440, a decline from 19% in 2023. The affordability crisis is particularly acute among Black and Hispanic/Latino households, with only 10% and 9%, respectively, meeting the income threshold of $221,200 necessary to manage monthly mortgage payments averaging $5,530. Although Asian and White households demonstrated higher affordability levels—27% and 21%, respectively—those figures also declined year-over-year, underscoring the broad impact of cost pressures. The persistent affordability gap reflects structural disparities in household incomes, with the median income for Black and Hispanic/Latino households trailing significantly behind that of Asian and White households. This affordability divide is further mirrored in county-level data, where urban and coastal regions such as San Mateo and Orange County exhibit the most severe gaps. Despite modest narrowing in ethnic affordability differentials, systemic inequities remain entrenched.

U.S. labor market remains resilient, but tariff uncertainty clouds outlook: The U.S. labor market held steady in the week ending April 19, with initial jobless claims rising slightly to 222,000 and continuing claims declining to 1.84 million in the prior week, signaling an ongoing resilience in the job market. However, escalating trade tensions and policy unpredictability—marked by sharp tariff increases and delayed reciprocal duties—have dampened business sentiment. While durable goods orders surged on aircraft demand, core capital goods investment remained weak, reflecting firms’ reluctance to commit amid uncertainty. The Fed’s Beige Book highlighted a pause in hiring and scattered layoff preparations, particularly in tariff-sensitive sectors like manufacturing and retail. Although recent federal employment cuts have yet to impact broader labor figures, the risk of labor market softening later in the year remains elevated.

Consumer sentiment falls sharply amid trade policy concerns and inflation fears: U.S. consumer sentiment declined sharply in April, falling 8% to a reading of 52.2—its fourth-lowest level since 1952—according to the University of Michigan. The decline reflects widespread concerns about economic conditions, particularly among middle-income households, and spans all major demographic groups. Persistent uncertainty surrounding trade policy, including President Trump's volatile tariff actions despite a recent 90-day pause, has heightened fears of renewed inflation and potential recession. With consumer spending comprising a substantial share of GDP, this erosion in confidence poses downside risks to near-term economic growth, as households may begin to scale back expenditures amid heightened economic anxiety.

California housing supply rises sharply, but sales remain soft as the market enters home buying season: Recent survey data from the California Association of REALTORS®, collected in early April, indicate a notable increase in listing activity, with 40% of respondents reporting a recent listing appointment and 33.8% successfully bringing a property to market—both reaching their highest levels in five years. These findings are consistent with MLS data, which show a double-digit growth in new listings ahead of the spring homebuying season. The increase in existing homes for sale has pushed the housing supply in California to some of its highest levels since the pandemic began. Despite the improvement in inventory, overall sales activity has remained subdued and constrained by elevated mortgage rates. As financing costs and buyer hesitancy continue to exert downward pressure on demand, expectations for price growth also have weakened, which could lead to slower home price appreciations in the coming months.

Note: This summary report gets updated every Monday by 6:00 pm PST. Feel free to email us at [email protected] if you have any questions and/or feedback.