This Week In A Nutshell: Rates are likely to stay choppy this week as markets weigh new inflation data on Tuesday against any developments in the peace talks with Iran.
Upcoming Attractions
The main event this week is Tuesday’s April CPI (consumer price index) report. Headline inflation is expected to be firm because of higher energy prices, and core inflation may also pick up slightly. Shelter inflation could look stronger because some rent data missed during last fall’s government shutdown will be captured in April. That does not necessarily mean underlying inflation is reaccelerating, but it makes it harder for the Fed to sound dovish.
Thursday brings retail sales, which are expected to slow after a strong March. We’ll also get PPI (producer price index) on Wednesday, jobless claims on Thursday, and industrial production on Friday. And finally, a long list of Fed officials will speak this week, and markets will be paying close attention after the Fed’s recent warning that they’re thinking about thinking about hiking.
Last Week’s Highlights
Last week’s jobs data pointed to a labor market that is firmer than expected, but not booming. April payrolls rose 115,000, above expectations, and the 6-month hiring average rose to 55,000, the highest since last May. That lowers recession risk, even though the labor market remains much slower than it was a few years ago. The details were more mixed. The unemployment rate held at 4.3%, but underemployment rose and labor-force participation slipped. Wage growth still looks contained, which is one reason the report does not suggest overheating.
Consumer sentiment also fell to its lowest level on record, a warning sign for housing because people tend to delay big purchases when they feel this bad about the economy.
Diving a Little Deeper
The key takeaway is that the case for near-term rate cuts weakened. The labor market looks strong enough for the Fed to wait, while inflation is still too high for the Fed to consider easing.
For housing, that means the path to lower mortgage rates still depends on either a cleaner resolution of the energy shock or clearer evidence that growth and hiring are weakening. The frustrating dynamic is that the labor market is strong enough to keep the Fed patient, but consumer sentiment is weak enough to keep buyers cautious. That suggests a market that continues to bounce along the bottom unless mortgage rates fall more meaningfully.
However, we are seeing some evidence that the housing market is firming up. Last week, pending sales hit the highest level in nearly 4 years. The impetus may be that housing demand was underperforming how low rates had fallen in late 2025/early 2026 because of a weakening labor market followed by bad weather to kick off the year. Now that the labor market is on better footing and affordability is gradually improving with tepid home price growth, we may see demand continue to rise despite rates being a bit higher than prior to the Iran war.
Redfin Housing Market Reports
Bay Area Luxury Home Prices Have Jumped 13% Since Launch of ChatGPT
- Luxury zip codes in the San Francisco Bay Area saw home prices rise 13.4% in the two years after ChatGPT launched.
- That was more than double the increase in the next-highest price segment, while prices fell in the most affordable Bay Area zip codes.
- AI wealth continues to boost the high end of the Bay Area housing market.
Land O’ Lakes, Florida is Redfin’s Hottest Neighborhood of 2026
- Land O’ Lakes and Plant City, both near Tampa, top Redfin’s list of the hottest neighborhoods of 2026.
- Six of the top 10 are Midwest suburbs, showing buyers are still chasing relative affordability near job centers.
- Two New York-area neighborhoods also made the list.
Pending Home Sales Hit Highest Level in Nearly 4 Years
- Pending sales rose 7.7% year over year during the four weeks ending May 3, reaching their highest level since September 2022.
- Buyers got some relief from slightly lower payments, lower mortgage rates, and more homes for sale.
- Still, the market remains slow for spring: homes are taking longer to sell, and the share selling above asking is at a five-year seasonal low.
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Chen Zhao