![Mortgage Investors Group in [Dynamic1]](https://migonline.com/assets/images/mortgage-investors-group.svg)
Economic Snapshot: Signs of a Softer Landing
Posted by : Moneek
The first quarter of 2025 delivered a complex but cautiously optimistic economic picture. While inflation remains elevated and job growth is showing signs of cooling, these crosscurrents are fueling expectations that the Federal Reserve may soon have room to ease interest rates—potentially unlocking new momentum in the housing market.
Inflation continued to edge higher in Q1, with the core PCE price index rising 0.4% in February. Some of this is being driven by new tariffs, including a 25% duty on imported vehicles. Meanwhile, the labor market is losing steam, and consumer sentiment around employment has weakened. This unusual mix of persistent inflation and slowing growth has prompted talk of stagflation, a scenario that poses challenges for policymakers. However, Fed officials remain confident that current inflation levels are manageable and that a soft landing is still within reach—especially if economic conditions continue to moderate.
Amid this uncertainty, housing stands out as a bright spot. Mortgage applications surged 80% in Q1—well above seasonal expectations—thanks to declining long-term bond yields and a modest rebound in available inventory. While construction still faces some headwinds from higher input costs, the increase in buyer activity signals renewed confidence. For real estate professionals, this is a crucial window to engage clients who may be re-entering the market in anticipation of lower borrowing costs.
Though headwinds like inflation and global trade remain, the broader outlook is shifting. If the Fed moves forward with expected rate cuts later this year, it could help catalyze stronger housing activity, consumer spending, and investment. Early indicators suggest the U.S. economy may still be on course for a soft, rather than stagflationary, landing—giving the real estate sector reason to stay prepared and optimistic.
Written by: Jeff Dechert, CMB, SVP Secondary/Capital Markets at Mortgage Investors Group
