Could a US-China Deal Finally End Market Uncertainty?

Weekly Mortgage Market Update 05/12/2025

Author

Michael Cassano
May 12, 2025

Hello everyone! We've got a packed newsletter today covering some major developments—from promising signs in U.S.-China trade negotiations to the Fed's latest move (or lack thereof), and a proposed tax bill that could unlock thousands of new listings. Let's dive in!

Read time: ~4 minutes

Rates ended FLAT compared to last week, and volatility was HIGH. Rates are in the high 6’s for most loan types without paying discount points. Paying discount points can get you in the mid 6’s.

Could a US-China Deal Finally End Market Uncertainty?

One of the coolest things about my job is seeing firsthand how closely tied our market is to broader economic events. Between me and my team, we talk to over 100 homebuyers every month, giving us a front-row seat to what’s driving—or holding back—today’s market.

And right now, there’s one word we keep hearing over and over: Uncertainty.

  • Uncertainty about mortgage rates.

  • Uncertainty about the economy and potential recession.

  • Uncertainty about whether we’re sitting in another housing bubble.

  • And now, uncertainty around the ongoing trade tensions with China.

Whenever uncertainty spikes, we instantly see its effects: fewer mortgage applications and pre-approved buyers deciding to hold back. But the moment we have clarity? The phones start ringing off the hook again. A great example: when the 2024 election concluded, buyer interest surged overnight, confirming once again that certainty drives confidence—and confidence drives action.

Right now, we might be nearing another pivotal moment. This weekend, US and Chinese officials met in Switzerland to potentially hammer out a trade agreement—especially around rolling back tariffs. If both nations reach a meaningful agreement, it could ease inflation fears, calm markets, and ultimately lower mortgage rates, bringing buyers rushing back in.

But if these talks don’t produce a real resolution, and tariffs remain a threat, expect more of the same: uncertainty, elevated mortgage rates, and hesitant buyers.

Key Takeaway: The US-China negotiations are key to market stability. A solid trade deal could trigger lower rates and a surge in buyer activity, while continued uncertainty will keep things sluggish for a while longer.

Fed Hits Pause, All Eyes on China 👀

This past week, the Federal Reserve decided to leave interest rates untouched at the 4.25%–4.50% range, the same level they’ve been at since December 2024. With clear signs the economy is slowing, why didn’t they cut rates?

Simple answer: China.

The Fed is closely watching U.S.-China trade negotiations—and for good reason. We haven’t even fully experienced the impact of those massive tariffs yet (some exceeding 100%!). Fed Chair Jerome Powell admitted it himself last Wednesday: "There’s so much uncertainty... If you talk to businesses, market participants, or forecasters, everyone’s just waiting to see how developments play out."

Translation for us in the housing industry: The Fed isn’t exactly sure what’s coming next.

Yes, inflation has been cooling—which usually would lead to rate cuts—but the unknown effects of tariffs and potential economic slowdown have the Fed playing it safe. On the bright side, they didn’t signal any rate hikes either, so we’ll take that as good news. 🤷‍♂️

Key Takeaway: Right now, the Fed is holding steady and taking a cautious wait-and-see approach. If trade tensions ease and inflation continues cooling, expect lower mortgage rates ahead. But if negotiations stumble or tariffs push inflation higher, rates could hold steady or even tick upward. Buyers on the sidelines have a brief window of opportunity right now—but things could shift quickly.

Could a New Tax Bill Unlock Housing Inventory? 🏡🚀

I’m no CPA—so always double-check with a tax pro—but when it comes to real estate, I follow important financial news closely. Recently, capital gains tax rules have become a major hurdle, keeping potential sellers sidelined and inventory tight.

Currently, the tax code lets homeowners exclude $250,000 in profits from their primary residence ($500,000 for married couples). Unfortunately, that number hasn’t budged since 1997, despite home prices soaring since then. 🤯

Now, nearly 8% of all homes sold in 2023 had profits that exceeded these exemptions, triggering significant tax liabilities. To avoid this, many sellers simply choose not to list their homes, reducing available inventory even further.

Enter the new bipartisan More Homes on the Market Act. If passed, it would double the exemption amounts ($500,000 for individuals and $1 million for couples) and adjust those numbers for inflation moving forward. This could encourage thousands of hesitant homeowners to finally list, boosting inventory and alleviating some affordability issues.

Key Takeaway: An outdated tax exemption is discouraging homeowners from selling, restricting inventory, and driving prices up. The proposed More Homes on the Market Act aims to modernize the exemption, potentially releasing thousands of much-needed homes onto the market.

Two Ways My Team & I Can Help

  1. Lets collaborate- Schedule a zoom meeting

  2. Tough Deal? Let us know if we can help