Portland Mortgage Market Update — May 30, 2025

There was a lot going on this week between Tariff talk, Nvidia Earnings and Fed Speak, but all eyes were on today's PCE report. But let's discuss the earlier items first. The market is seeming to come to grips with the "will he/ won't he" application of Tariffs that the Trump administration seems to be navigating. Robert Armstrong with the Financial Times coined the term "TACO trade" (Trump Always Chickens Out) describing the negotiation tactic where Trump applies outrageous tariffs initially to get all parties to the table, then eases the tariffs as negotiations improve. For the most part, this has worked in the sense that US is managing to re-evaluate and restructure its trade agreements to (hopefully) a more equitable position. The problem is the President really didn't like the term and now there is fear that in an effort to avoid appearing weak he will lean even further into his methods causing a recession or worse. Beyond the Tariffs, Nvidia beat their estimates allowing the S+P to remain in the green for a while longer, and the Fed minutes from their last meeting were released, which showed a Fed that is increasingly concerned about rising unemployment and persistently high inflation lingering as a result of the Tariffs. In short, they are worried about stagflation on the coming horizon.

Thankfully, the PCE report today came in better than expected! This is the Fed's preferred measure of inflation, and the Headline decreased to 2.1% from 2.3% Year over year, and beat the monthly expectation of 2.2%. Better yet, the overall trend is improving. The year over year core inflation totals 2.5%, but the 6 month run rate decreased to 2.6% (from 2.9%) and the 3 months run rates is 2.7% (vs 3.5% last month). Shelter remains to be the problem child of these inflation reports. The metric the PCE uses to establish the Shelter cost is showing a 4.23% increase year over year, but real-time readings from Zillow show a 3.2% increase. Bottom line, despite tariffs and everything else, inflation seems to be right in line with the Fed's target goal and we should be looking forward to a rate cut in the coming months.

Need a quick close? I have a file I submitted to underwriting yesterday afternoon, and I just got the full approval back from underwriting! We are processing loans quicker than the insurance companies can put together a quote right now, so have your clients call me if you want to write the strongest possible offer!