‘Liberation Day’ brought little joy to financial markets globally, with stock markets down big and recession risks (for the US and elsewhere) ratcheting higher. The silver lining for the real estate market is that 10-Year US Treasury Bond yields fell to near 4% on April 3, and that could see average mortgage rates drop to near 6.5%.

Global “reciprocal” tariffs announced. On April 2, President Trump unveiled a new “baseline” tariff of 10% on imports and country-specific tariffs set at roughly half the tariff rates those countries charge on US exports. During his press conference he revealed Commerce Department estimates of the effective tariff rate imposed on US exports and the “discounted reciprocal” tariffs that will be put on exports from those countries.

TP: To be clear, China DOES NOT charge a 67% tariff rate on US goods, but it does have a massive (nearly $1 TRILLION) trade surplus with the US. The fine print under the “Tariffs Charged to the U.S.A.” says that the estimated effective tariff rates “include currency manipulation and [non-tariff] trade barriers.”

Now, I have no doubt that the Chinese yuan would be MUCH stronger today (after decades of blistering GDP growth) if the currency were freely tradable. And non-tariff trade barriers can be very significant: regulations, standards, quotas etc.. For instance, raw US beef still cannot be exported to Australia because of a 2003 (!) ban related to Mad Cow Disease. Nonetheless, the currency manipulation/trade barrier fine print and the actual calculation of this effective tariff makes the numbers very subjective.

Stampede to safety. On Thursday morning (April 3), the yield on the 10-year US Treasury Bond tumbled as much as 17 basis points to 4.01%. This is a very large move in a single day. Keep in mind that the 10Y UST yield was at 4.80% in mid-January 2025! [MBS Highway]

So why are bond yields falling? Because: 1) investors are stampeding out of the stock market and seeking the relative safety of bonds, and 2) recession risks are rising, which increases the likelihood that the Fed will have to cut rates by a larger amount, sooner. Think about it: if the market was still primarily worried about the inflationary impact of these new tariffs, bond prices should be falling (yields rising) in anticipation of a continued Fed pause or even new rate hikes!

Boomers are selling! (And buying!) The 2025 update of the NAR’s “Generational Trends Report” showed that Boomers were (by far) the largest sellers of properties in the last year — which makes sense, they’re older and may own multiple homes. What was unexpected was Boomers reclaiming the top buyers spot from Millennials. There are more Millennials (~73 million) than Boomers (~71 million), but the Boomers have massive home equity after decades of appreciation. They can buy in cash and not worry about high mortgage rates. [NAR]

It’s jobs week again!
JOLTS: Multi-year decline in job openings continues. The US had 7,568,000 job openings in February 2025, down just 2% from January 2025, but down 10% from February 2024, down 23% from February 2023, and down 34% from February 2022. The “hires rate” was steady at a very low 3.4%, and the “quits rate” was steady at a very low 2.0%. [BLS]

TP: What do those low hires and quits rates actually mean? Given all the economic uncertainty, companies are reluctant to hire, and employees aren’t confident enough (or aren’t being offered enough) to quit.

ADP: Solid jobs growth, but slowing wage growth. Private employers added 155K jobs in March, well ahead of Wall Street expectations of +125K. However, the annual wage increase for “job changers” dropped from 6.8% to 6.5%, while the wage increase for “job stayers” fell from 4.7% to 4.6%. [ADP]

TP: Take the job changers wage growth, subtract the job stayers wage growth, and you get an estimate of the wage premium gained by switching jobs. When that number was high (>8% for most of 2022), there was a huge incentive for workers to switch jobs. Well, now that wage premium is just 1.9% — hardly worth the effort, which also helps explain the low quits rate in the JOLTS report.

BLS jobs report preview. The extremely important non-farm payrolls report will come out Friday April 4, with Wall Street expecting 135,000 job additions for March and the unemployment rate (“UR”) to be stable at 4.1%. Given all the recent job cut announcements (not just DOGE), there’s a good chance the UR could edge up to 4.2% or even 4.3%. On the flip-side, stronger than expected jobs growth and a stable UR could see bonds give back some of their recent gains.

Signs of spring. The March 2025 update to the Realtor.com residential listing database was pretty encouraging. The number of active listings rose 5% MoM to 893,000 (that’s +28% YoY). After (what I would call normal) seasonal price declines in the fall/winter, the median listing price rose 3% MoM to $424,900. New listings were up 10% MoM to 436,000 (+23% YoY) and pending listings were up 12% MoM (roughly flat with March 2024).

TP: Lower mortgage rates, larger inventory, and lower prices in certain markets? All good signs for improving existing home sales over the coming months.

Mortgage Market

As mentioned above, the yields on US treasury bonds have been trending sharply lower since mid-January 2025 (4.80% → near 4.00%). Up until recently, that has mostly been a “flight to safety” thing (money flowing out of stocks into bonds).

But lately (and especially after the April 2 tariff announcements), it’s been a “recession risk” thing. If the US economy starts contracting (and the UR rises further), nobody will worry about inflation anymore. The Fed’s hand will be forced and they’ll cut rates faster, and by a greater magnitude than their current “dot plot” forecasts of one or two 25 bps cuts suggest.

Here’s what the Fed Funds Rate futures market is currently pricing in for rate cuts. Note that the current Fed Funds Rate policy range is 4.25–4.50%.

• May 7 FOMC Meeting: 78% probability that the policy rate will remain at 4.25–4.50% (down big from 88% last week)! 22% probability of a 25 bps cut (25 bps = 0.25% = a quarter percentage point) to 4.00–4.25%
• June 18 FOMC Meeting: 21% probability that the policy rate will remain at 4.25–4.50% (down big from 34% last week). 63% probability that the policy rate will be 25 bps below current (which implies one rate cut on either May 7 or June 18). 16% probability that rates will be 50 bps below current.

They Said It‍

“The fact is, we’ve been operating in the worst housing market in almost 50 years. For context, in 1978, there were 4.09 million existing homes sold when the US had a population of 223 million. Contrast that to 2024, where 4.06 million existing homes sold with a population of 341 million, and it illuminates just how depressed the housing market has been this past year. Despite that fact, we are performing at a level most would expect in a robust housing market.”— Gary Friedman, CEO of Restoration Hardware