Housing Market Reverses Gains as Sentiment Reaches 70-Year Low

0:00The war in Iran, AI displacement, a confusing labor market, declining consumer sentiment, and higher inflation, all of that made the news in just the last week. It's a lot, and it can be hard to keep up and understand how all of this news and information impacts your business and your portfolio. But you don't need to be overwhelmed or worried when instead you can be informed and prepared because that is how you navigate and even thrive during uncertain periods. And that's exactly what we're going to help you do here today on On The Market. We're going to dig into the absolute avalanche of economic news and data that's come out in recent days, and we're going to distill it into what actually you should be paying attention to and what you can ignore.

0:52This is On The Market. Let's get into it.

1:00Hey, everyone, it's Dave. Welcome to On The Market. Today on the show, we're going to be digging into recent events and data that are genuinely shifting expectations for the entire economy and for the housing market. And I'll just be honest, there's a lot happening recently. It can be tough to keep up and try and piece together all this information that feels like it's coming from every single angle, every part of the economy, every news that you hear kind of shifts your brain about what you should be expecting for your business. And it can be confusing distilling that into actionable steps that you can actually do to help protect your business during uncertainty and actually help it grow.

1:43But I think I can help. I think I can help distill all the information that we've heard in the last couple of weeks down into some digestible takeaways, a couple of predictions and actions that you as investors or industry professionals can take away. We got a lot to cover today, so we're going to just jump right into this thing. So first up, we're going to start with the news that I think personally is the biggest news for the housing market in general. And I do think is going to drive a lot of economic decision making, a lot of monetary policy, a lot of consumer behavior for the foreseeable future.

2:20And that was inflation really starting to pick up again. Fortunately, since 2022, since we saw the insane inflation of 9.1 percent, that's where it peaked, things have been steadily coming down. For the last year or so, they've been up or down. It's been kind of volatile. But this last month, which reported on inflation data from March of 2026, we saw a pretty dramatic reacceleration of the consumer price index, which is the most publicized way of tracking inflation. Overall, the overall CPI, the top line number, went from 2.4 % to 3.3 % in just a single month. So it went up 0.9 % in a single month.

3:06That's not normal, at least, you know, not in COVID, but like in a normal month in the last two, three years, we would expect, you know, 0.2, 0.3 % in one direction or the other. But seeing 0.9 is a pretty dramatic acceleration in inflation. And although it's just one month, and I always say on the show, like, we don't want to get too obsessed, too overly concerned about one month of data. There are a lot of reasons and evidence that suggests that this wasn't a one time anomaly and it might actually get worse. Because if you think about what happened in the last month and why things went up so much.

3:44Yeah, it's easy to point at oil prices and the energy shock that is resulting from the war in Iran. But I don't even think we've seen or measured the full impact of that in the economy. Sure. If you look at crude oil prices, yeah, they're up like 50 percent, even after the ceasefire. That's very shaky right now. I'm recording this on the 13th of April, comes out on the 15th. So who knows what happens in just the two days between recording this and releasing it. But as of right now, this morning or yesterday, President Trump announced the blockade of Iran. We're now seeing oil prices up above$100 a barrel again.

4:21But even with the ceasefire in place, they were still around$100 a barrel. That's still 50 % higher than they were back in February. And so, yeah, that's pushing up inflation. But oil is also an input cost for so many things in the economy, whether it's construction because they use diesel or because they have to import things that are put on ships that That also use diesel or food prices because 30 percent of the world's fertilizer goes through the Strait of Hormuz or service businesses that are now incurring themselves higher costs because of gas prices, because the cost of plastic is going up.

5:04all of these businesses are going to have input cost increases. And we don't know if and how much of that is going to get passed on to consumers, but I would guess we're going to see a lot of it, right? Actually, another measure of inflation. So I'm talking about the consumer price index, what it costs you and me to go out and buy stuff at the store. That's gone up. But there's something also called the producer price index. And this actually measures what it costs people to make stuff. And that was up 0.7 % in just a month. And I was looking at forecasts for this month, and it's going to be up over 1 % in the next month.

5:43That is a lot for a single month. And I, you know, we don't know if they're going to pass it on to consumers, but if I was a betting man, sometimes I am, I would bet that those prices are going to leak into the rest of the economy. and we're going to see prolonged inflation. And this just isn't theory. It's not just my opinion here. If you look, this isn't the first energy shock that we've had in the United States has been going on for decades. Right. And historically, if you look at energy shock, price shocks like this, they do tend to ripple through the economy with other prices. Like we are probably going to see more upward pressure on inflation.

6:20And we already had some upward pressure on inflation, right? It's been going up, you know, not a lot, but over the last couple months because of tariffs, we have seen inflation go up a little bit. And this just adds to that. So if you're asking me, I think inflation is going to stay elevated, definitely in the threes. I think it could go up even more than it is last month. Now, I am not saying it's going to 9%. I don't think that's happening unless something else happens. But just the trajectory right now, Now, could it hang in the 3 % to 5 % range for the rest of the year? Yeah, I do think so.

6:54And that in itself has profound implications. I know it doesn't sound crazy. Like the difference between 2 % to 3 % in inflation might not sound like a lot to you. And in some ways, in your personal pocketbook, it might not be that much. But if you think about some of the macroeconomic or monetary policy things that are based off of this number, the inflation number, it really does matter. and I'm going to explain why. First and foremost, you should know that inflation and mortgage rates are very highly correlated, right? When inflation goes up, bond yields go up. When bond yields go up, mortgage rates go up.

7:31That's just how it works, right? That's why in the last month in March, we saw mortgage rates on average go from about 6 % to now 6.4-ish percent where they're sitting today because the fear of inflation. That is why. Now, since this print came out, this inflation print that came out Friday, I guess the relatively good news is that the bond market and mortgage markets were already expecting this. When they saw oil prices go up so much in the last month, they already adjusted. That's why mortgage rates went up so quickly. So luckily, this inflation data that we got last week hasn't pushed mortgage rates up even more.

8:13And I don't think they're going to go up even more right now. We're going to have to wait and see further inflation data and see where that goes. But right now they're hanging in the mid sixes. But the thing I want everyone here to know is that I don't really see a reason to expect that they're going to go down. Can anyone articulate to me why mortgage rates are going to go down this year? If you listen to the show, I've been saying for a long time, I don't think we're out of the woods for inflation. I did not predict this war in Iran. I'm not saying that. But there are a lot of reasons we have inflationary pressure in the United States, whether it's tariffs, whether it's our national debt.

8:48Generally, geopolitical uncertainty increases the risk of inflation. So I've been saying this for a while, but I am feeling particularly confident in that advice right now because how are they going to go down, right? You need one of several things to happen. First and foremost, you need inflation to go down. How does inflation get better at this point? Might we see oil prices go down? Yeah. If there is a deal with Iran struck, maybe we see oil prices go down. But even if there is a deal, if you look at some of the analyses by people who know way more about oil than I do, Goldman Sachs and these big companies, they are saying that even if the Strait of Hormuz opens and we start getting oil flowing again, oil prices are likely to remain elevated for about a year and we don't have a deal.

9:36So is inflation going to go down? I hope so. But I don't really see that happening in the meantime. What about Fed rate cuts that going to bring down mortgage rates? Well, you know, going into the year, the markets believe that there is going to be two rate cuts, half point rate cut throughout the entire year. Now, people who literally bet on this stuff say there's about a 75 percent chance that there are no rate cuts this year. I should mention that even if there are rate cuts that might not bring down mortgage rates, but rate cuts in themselves might not happen. The other thing I hear people say is, what about a new Fed chair?

10:11Nope, don't see that happening either, right? New Fed chair can come in and say, yeah, I'm going to cut rates even though inflation's high. I don't think he's going to do that, but he could. But he's also one of 12 voters, right? The chairman of the Fed does not unilaterally make monetary policy in the United States. He's one of 12 people, not to mention the fact that Senator Tom Tillis is refusing to bring Kevin Warsh's nomination to a vote until the Department of Justice withdraws its lawsuit against Jerome Powell. So we might not even get a new Fed chair on May 15th when we're expected to. So all of these reasons, whether it's inflation staying high, the lack of rate cuts, tariffs, the uncertainty about a Fed chair.

10:58All of those are reasons why I do not believe mortgage rates are going to come down. I've been trying to say this for a long time. And here we are. Right. I think people are finally starting to accept it. I've been arguing with people on social media about rates for years, people saying they're going to be in the fives, they're going to be in the fours. I don't think so. And I'm feeling more validated about this. I hope I'm wrong, right? You know, it would be great if we got back into the fives. I think a five and a half mortgage would be a great place for us to be sitting. Five to five and a half.

11:29That's normal. That's great. But I don't think we're getting there in 2026. I think it's less and less likely every day right now. And, you know, I'm not happy to be right about this. It sucks. Let's just admit it. This is not fun. We've been in four years of low affordability, of a slow housing market. I hate it. No one likes this if you're a homebuyer, right? We are reversing this trend where we are finally starting to see affordability increase. That's reversing now. And it sucks. But my job on the show is to be realistic, to help you all prepare your businesses, to prepare your portfolios for what I think is going to happen.

12:09And I will be wrong in the future. I've been wrong in the past. But for three, four, five years now, I've been pretty good on rates and home prices. And I just want to say, expect higher mortgage rates. Like, that's it. Make your decisions with higher mortgage rates. Now, of course, it's not just about the number you see on your when you get a preapproval. This is also going to have implications for the housing market. And this higher inflation is also going to impact other parts of the economy that you need to be paying attention to. We're already starting to see evidence of this. It happened quick.

12:45Like normally in housing, data lags a little bit, right? Current events, you start to see it a couple months later, right? The impacts of it. But we are already starting to see some of the impacts of higher mortgage rates and the war in Iran hitting the housing markets. And this is stuff you do really need to pay attention to. This is stuff that matters. We're going to get into it in detail. But first, we have to take a quick break. We'll be right back. You know what's funny about tax season? It's one of the only times I actually look at my full financial picture. What I earned, what I spent, what I saved.

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15:40Welcome back to On the Market. I'm Dave Meyer. Going through recent news, I just kind of want to summarize what's been going on in April so far because it's so much. And I want to help you understand what it means for the economy and the housing market. Before the break, I just talked about inflation, why I think it's going to stay high in the mid threes at a minimum. I think it might go higher. and that mortgage rates are staying in the mid-sixes for the foreseeable future. I hope that changes. Maybe something happens. Maybe the straight-up Hormuz opens up. Maybe we get a little bit of relief.

16:10But right now, I don't really see these things coming down. I don't see any evidence, any narrative that suggests that they would. And this is impacting the housing market in measurable ways already. First and foremost, I think the thing you need to know is that we're starting to see the housing market slow down even more. We saw one of the slowest Q1s, first quarter of 2026, that we've ever seen, one of the slowest times. And now we're even seeing things slower. Now, not every data provider tells us inventory or pending sales numbers on a weekly basis. We're gonna have to see where April comes in, but Redfin does actually do weekly data.

16:50And what it's showing is that pending home sales are down in the beginning of April, right? They're down 2.5 % year over year. might not sound like a lot, but we are already extremely low. So seeing them go down another two and a half percent, it's going to hurt. The NAR also released their existing home sales data. We just got this today and Tuesday, April 13th, and we saw almost 4 % decrease monthly. And I should mention this data is seasonally adjusted for all those nerds out there. So this is even accounting for the seasonality that we see in the housing market. And right now we We were on pace for under 4 million home sales.

17:30Now, that's not crazy by recent standards. You know, between 2023 and now, we've been hovering around that 4 million sales number. You know, long-term average is about 5.25 million. So we're down a lot from there, more than 20 % off of normal. We're down a lot over COVID, where we were over 6 million, but that's kind of not normal either. But I think a lot of people, myself included, were hoping that the affordability gains we are starting to see would start to pick up the housing market. We would see more inventory. We would see more home sales. But I actually think we could go lower. I know, again, this isn't good news.

18:07But if you look at everything that's happening right now, there is not any reason to believe that we are going to see more home sales. And I think, if anything, the evidence suggests that the market could go lower. So why is that? Why am I making this statement? Because I know it's not fun. This isn't news that I like to share, but there are reasons that I believe it. Number one, we already talked about, right, declining affordability in mortgage rates, but there are other reasons. Right now, American consumers, American homeowners, for lack of a better term, they're just they're just not feeling it, right?

18:44They just aren't in the mood to buy stuff. Last week, we got April's consumer sentiment score. This is something that has been measured for 70 years. And it was the worst consumer sentiment that we have seen in 70 years. That, my friends, is ugly. That is historically ugly data. And again, don't want to make too much about one month of data, but it's been hovering near these lows and it has gone even worse in the last month. Economists were expecting it to go down. It went down even more. 70 years. It is the lowest point that we have seen. That is crazy. Now, I want, though, to put this into context, because hearing that it can make you think that we're in this abysmal economy, right?

19:35Like, are we actually in the worst economy in the last 70 years? No, like, of course not. We're not even really close to that. There have been far worse economic times than the one that we were in. I'm not saying now is good. I don't think now is good. I think we have a lot of structural challenges in the economy that we need to contend with. But is this the worst economy in seven years? No. But sentiment matters. People don't feel good. They don't feel optimistic about the economy. And this spills into the economy. It actually can be a lead indicator for economic activity. And my take on this is that even though this isn't the worst economy ever, right, the stock market has been resilient, the labor market surprisingly resilient.

20:24I think people are just tired. I think people are tired of five straight years of inflation, of the fear of AI, of a very slow hiring market of much higher mortgage rates and lower housing affordability. People need a break from what feels like an onslaught of uncertainty and economic risk, and they're not getting it. And they're just, you know, it compounds over time. I'm sure you feel this. I feel this, right? I absolutely understand this. You see, every time you go to the store, every time you go to the gas station, every time you go to buy, look at a listing on Zillow or Realtor or whatever.

21:06Prices just keep going up and up and up and incomes aren't keeping up. So I get why people have low sentiment. And for the economy, I guess, fortunately, it depends how you see it. But in some ways, it's been good because it's not like we're in a huge recession. People are still spending. You know, the economy is still flowing. But I do think at a certain point, the rubber hits the road. Right. Sentiment is down. Wage growth is starting to go down. If we see this inflation stay where it is, we're probably going to see negative real wage growth this year, which if you remember last November, I think I put out an episode defining what I call the regular person recession.

21:47Right. I don't really care about GDP in the grand scheme of things. You know, I care about it, but it's one data point. I don't think that should be the barometer of a recession. I think the barometer of recession should be our average Americans doing better or worse than they were a year ago or a month ago or whatever. And negative real wage growth. If your wages are growing slower than inflation, that just saps that. I think there's a good chance that we hit that. I think it's actually probably likely at this point that we're going to have real wage growth and people that's going to impact people.

22:18Right. There's I I'm surprised as you how much people keep spending despite the economic uncertainty. But at some point, I have to believe that people are going to pull back. I'm not saying there's going to be a depression or anything like that, but I do think we will probably see a decline in economic activity because of all this stuff is going on. Now, I should mention, it's not just consumers who are worried. Actually, at BiggerPockets, we do this sentiment survey and I, you know, I write it. So I sent out this survey that asked, what impact do you expect the Iran war to have on real estate market in the next three months?

22:54And it's just overwhelmingly negative. People just feel over 65 percent of people, more than two thirds of people think that it's going to be a real detriment, a real negative to the housing market. Everyone else said neutral. No one else really thinks it's going to be positive. So I'm just saying this, if investors who I might mention tend to be on the more optimistic side of the consumer spectrum, they're not feeling great about some of the recent developments in the economy. And so I think that's going to spill over everywhere. Now, I don't have any idea if they're going to call it a recession or not, but I think the reasons for fear that people are experience are real.

23:36The risk of recession, at least in my mind, is growing. Again, my hot take, if you remember back in December, my hot take for 2026, we are going to enter a normal person recession. And I think that is getting more and more likely. Now, I'm not saying that nothing is going right. In fact, unemployment has been kind of decent. It's at 4.3%. That is good. But if you zoom out and look at the labor market picture as a whole, not looking so good, right? We had a good March brand. A lot of jobs added in March, but we've consistently seen those numbers revised down after that. And if you just zoom out and look at sort of the overall picture for the last, I don't know, 15 months or so, it hasn't been good, right?

24:17We've had multiple months where we've lost hundreds of thousands of jobs. If you look at the revised data for 2025, we averaged only 15 ,000 jobs added per month. That's not a lot for context. And I think we're just in for more of that, right? Again, I'm not trying to spread fear. I just like point me in the direction of data that suggests the labor market's going to get better. I haven't seen any, even the most bullish people, right? Even the most bullish people about AI who say the economy is going to be ripping and roaring because of AI. They're saying that because they believe that the CapEx, the capital expenditures into AI are going to carry the economy, not because the labor market is good, right?

24:58The people who are bullish about AI are the ones who are most vocally saying that the labor market is going to get worse. Point me in the direction if you think I'm wrong, like put in the comments. Why do you think the labor market's going to get better? Because I have a hard time seeing in the immediate term. I'm not saying AI is going to take all our jobs and we're all going to be unemployed. I don't know if that's true, but I'm not like on that end of the spectrum where I'm like, oh, my God, everything's over. But in the short run, almost everyone agrees that there's going to be labor market disruption.