Inflation hits 3.8%, threatening higher mortgage rates

Talk less, show more

When clients get nervous, many agents instinctively push harder. That usually backfires.

In today’s Foundation Plans, we finish our series on hesitant clients by covering one of the most important skills an agent can develop: helping people make confident decisions without making them feel pressured into one.

With inflation rising, affordability stretched, and massive amounts of uncertainty still weighing on buyers, that skill matters more than ever.

- David

Inflation spiked to 3.8% in April, driven by gas prices 

US CPI inflation rose to 3.8% year-on-year, the highest level since 2023, while rising 0.6% month-on-month, according to the BLS. But the bigger concern was under the surface. 

Core inflation unexpectedly ticked up to 2.8%, suggesting the recent energy shock may already be spilling into the broader economy. 

At the same time, real earnings fell 0.5% from March to April, and Treasury yields rose after the report, a sign that markets are starting to take the risk of broader inflationary pressures more seriously.

Here are the key data points to know:

• Headline CPI: 3.8% YoY (+0.6% MoM, SA)—up from 3.3% in March

• Core CPI (less food & energy): 2.8% YoY (+0.4% MoM, SA)—up from 2.6% in March

• Gasoline: +5.4% MoM (SA), +28.4% YoY—energy shock continues

• Shelter: +0.6% MoM, 3.3% YoY—elevated, but largely a data artifact from the government shutdown rolling off the calculation

• Airline fares: +2.8% MoM—early sign of energy bleed-through into core

• Real earnings: -0.5% MoM—consumers losing ground in purchasing power terms

My take

Inflation was already a problem, but this report suggests it may be spreading beyond energy into the broader economy. Once higher fuel costs start showing up in categories like travel and household goods, the risk shifts from a temporary shock to more persistent inflation pressure that could keep interest rates elevated for longer. That’s especially important for housing, where affordability was already strained before Treasury yields and mortgage rates started reacting to hotter inflation data again. And with recession fears easing at the same time inflation is heating back up, the Fed has little reason to cut rates anytime soon — meaning the market may need to prepare for a much longer stretch of higher borrowing costs. For buyers on the fence, this report is a reason to stop waiting — mortgage rates are more likely to move up from here than down.

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Existing home sales remain flat

Existing-home sales edged up 0.2% to a 4.02 million pace in April from the upwardly revised March numbers (now 4.01 million vs. 3.98 million original), and matched the prior year pace. That’s according to realtor.com’s latest update.

Here are the main takeaways:

• Sales stayed steady – Existing-home sales rose 0.2% in April to a 4.02 million annual pace, matching last year’s level. March was also revised higher, suggesting the market has been more stable this spring than initially reported.

• Buyers are still active despite rates – Pending sales improved slightly in March, and many buyers and sellers are still moving forward even with mortgage rates staying higher than expected.

• Price growth is slowing nationally – The median existing-home price rose 0.9% year over year to $417,700, but regional trends varied widely. Prices climbed most in the Northeast (+4.8%) and Midwest (+3.6%), while the West saw prices fall 1.4%.

• Some sellers are pricing more realistically upfront – Asking prices have softened this year, especially in the South and West. Fewer sellers in those regions are making price cuts later, suggesting more homes are being priced correctly from the start.

• The market looks balanced nationally, but local conditions vary sharply – Housing supply reached 4.4 months nationally, which is considered relatively balanced. But Realtor.com emphasized that local markets are becoming increasingly fragmented, making local expertise more important than ever.

My take

The housing market basically shrugged in April — sales ticked up just 0.2% and matched last year's pace, which sounds boring until you realize the market has been fighting elevated mortgage rates and stubborn affordability issues the whole time. The most interesting part isn't the national number, though; it's how differently regions are behaving: the Northeast is up nearly 5% on prices while the West is actually down 1.4%. Sellers in the South and West also seem to have finally gotten the memo on pricing realistically from the jump, rather than listing high and cutting later. Bottom line — this isn't a hot market or a crashing one, it's just a slow, fragmented grind where local conditions matter way more than any national headline.

Most expensive U.S. home sales in April

Luxury buyers continued spending aggressively in April, with two homes selling for more than $55 million and all 10 of the month’s top sales closing above $30 million. Coastal Florida dominated the list, accounting for half of the country’s priciest transactions, while California claimed four spots, including the top sale: an unfinished mansion in Montecito that traded for nearly $60 million.

These are the top 10 most expensive U.S. home sales of April, according to Redfin:

1. 2910 Sycamore Canyon Rd., Montecito, CA 98108: Sold for $59.9 million 

2. 1610 N. Ocean Blvd., Palm Beach, FL 33480: Sold for $55.2 million 

3. 625 Reinante Ave., Coral Gables, FL 33156: Sold for $47 million 

4. 1005 Benedict Canyon Dr., Beverly Hills, CA 90210: Sold for $41.3 million 

5. 860 Admiralty Parade E., Naples, FL 34102: Sold for $40 million 

6. 1280 S. Ocean Blvd., Manalapan, FL 33462: Sold for $37 million 

7. 100 Vail Rd., Vail, CO 81657: Sold for $36 million 

8. 47320 Highway 1, Big Sur, CA 93920: Sold for $35.8 million 

9. 84 Isla Bahia Dr., Fort Lauderdale, FL 33316: Sold for $34 million 

10. 2668 Bayshore Dr., Newport Beach, CA 92663: Sold for $33.5 millio

My take

The ultra-luxury market operates by entirely different rules than the broader housing market. While most buyers are still grappling with affordability and mortgage rates near 6.5%, buyers at the top end are largely paying cash on trophy properties in markets like coastal Florida and elite California enclaves. And Florida's dominance on the list isn't just about lifestyle — it reflects a permanent shift in where the wealthy are choosing to plant their financial flags, driven by tax advantages that keep looking more attractive as federal policy debates around high earners heat up.

Schematics

The news that just missed the cut

• Corcoran CEO Pam Liebman and Brown Harris Stevens CEO Bess Freedman sparred at the TRD Forum – we’re totally here for it! 

• Compass increased its listings exposure in a deal with the nation’s largest MLS

• The wealthy keep buying Manhattan real estate despite potential pied-à-terre tax

• Use this email system to increase your open rates

• Why high-income professionals are choosing luxury rentals over homeownership

Foundation Plans

Advice from David to win the day

Over the past two weeks, we've been covering how to handle clients who are getting cold feet. You can read parts 1 and 2 here and here. 

This week, we cover how to help clients make a decision without making them feel pressured into one.

When buyers get nervous, many agents instinctively push harder. That usually backfires. Most clients don't need more pressure — they need more clarity.

When a client starts wavering, here’s what to do:

1. Present the options simply – One of the fastest ways to calm an emotional conversation is to make the choices in front of the client feel concrete and manageable. If a buyer is rattled about a property, walk them through what's actually on the table: negotiate repairs or credits, accept the home as-is, or walk away entirely. Then ask one simple question: "Which of these feels most right to you?"

That shift changes everything. You're no longer selling them toward a decision. You're helping them find one.

2. Explain the tradeoffs honestly – Once a client leans in a direction, help them understand what that choice actually means. If they're thinking about walking away to wait for rates to drop, be straightforward: lower rates could also bring more buyers back into the market, reduce their leverage, and push prices up. The conditions they have today may not be there later.

If they're leaning toward staying in the deal, remind them what they already know — the home, the neighborhood, the terms they negotiated, and the reasons they wanted to move in the first place.

The goal isn't to steer them toward the outcome that's easiest for you. It's to make sure they're deciding with open eyes.

3. Let clarity do the persuading; don’t talk too much – The biggest mistake agents make in these moments is filling the silence. Clients can sense when someone is working toward a predetermined conclusion — and it erodes trust fast. The agents who handle cold-feet conversations best tend to share the relevant information, ask a good question, and then get out of the way.

Ironically, clients tend to trust your guidance more when they feel genuinely free to walk away.

That’s the bigger lesson behind this entire series. Strong agents don’t lead with pressure. They lead with composure, honesty, and clarity — and those are the agents clients remember long after the transaction is over.

Just in Case

Keep the latest industry data in your back pocket with today’s mortgage rates:

“You’ve gotta keep control of your time, and you can’t unless you say no. You can’t let people set your agenda in life.” — Warren Buffett

Don’t let events or other people set your agenda, friends. Stay ruthlessly focused on your goals — your time is limited, and you only get one life.

Make the most of it. Have a wonderful week. We’ll see you back here on Friday!

- David