Various trade publications continue to predict a decline in mortgage rates the second half of the year, yet at the same time Walmart, Ford, and others have announced big price hikes coming down the pipeline. What does this mean for the economy, interest rates, and the real estate market? Is Walmart predicting higher mortgage rates?
What was in the recent data on inflation?
As I was writing this article, both the consumer price index and the producer price index came in substantially lower than expected. The consumer price index rose a seasonally adjusted 0.2% for the month, putting the 12-month inflation rate at 2.3%, its lowest since February 2021. The headlines say it all “Inflation unexpectedly cooled in April despite Trump’s big tariffs announcement”
What does the inflation data mean for mortgage rates?
I would not read too much into the data as it is moving way too quickly and the CPI is a lagging indicator. Long and short interest rates look to stay around 6.75-7.5% through the end of the year unless something much larger occurs in the economy like a recession or some other sort of shock. See my prior article of why mortgage rates are rising when they should be falling as the economy softens. Look at the chart below vs. the chart above; rates have actually risen over the last 30 days.
Walmart and Ford raising prices
“The magnitude and speed at which these prices are coming to us is somewhat unprecedented in history,” Walmart Chief Financial Officer John David Rainey said Thursday. He said that sales rose steadily in the latest quarter as shoppers flocked to Walmart’s deals and fast shipping, but added that the trade war’s full impact on consumers has yet to come.
Many businesses stockpiled goods before the tariffs hit, and some businesses have absorbed the initial extra costs rather than passing them along to consumers. Walmart’s announcement suggests that some businesses are running out of options for putting off price increases, economists said.
“Retail is incredibly low-margin,” said Jason Furman, a Harvard economics professor who was an adviser to President Barack Obama. “This isn’t Walmart taking advantage of this global situation. This is Walmart having no choice but to raise prices.”
Other industries have warned of looming price increases. Ford Motor told U.S. dealers in a recent memo that it was raising sticker prices by up to $2,000 on three models produced in Mexico: the Mustang Mach-E electric vehicle, the Bronco Sport SUV and the Maverick compact pickup. Ford said the price increases would kick in with vehicles arriving at dealers in late June.
Ford CEO Jim Farley said last week it was “easy to see” tariffs leading to industrywide price increases as soon as the summer, given that about half the vehicles sold in the U.S. are imported and will be stuck with “$5,000 or more of tariffs” by then.
Long and short, if large companies like Ford and Walmart are raising prices, everyone else will soon follow suit as they have even less pricing power than Walmart.
Another wild card moving interest rates is the budget deficit
The media continues to focus on tariffs being the culprit in this economy, but we cannot forget the other big driver of rates which is deficit spending. Unfortunately the most recent tax plan continues to dramatically increase the deficit through tax decreases and continued spending on various entitlement programs. Neither political party has shown the willpower to actually reign in government spending while holding the line on taxes which will ultimately lead to even higher deficits and higher interest rates. .
Federal Reserve is playing the waiting game on inflation
Remember the US deficit must be financed through the sale of treasury bonds, as more supply comes online, prices decline leading to higher rates. Even if the tariff situation is better, the huge deficit spending will continue to put pressure on rates regardless of the federal reserve. The federal reserve is in a tough position getting heat from everyone about the economy, but unfortunately deficit spending and prices are out of their direct control due to outside factors. Based on all these factors, the federal reserve is basically stuck and is unable to “save” the economy like it has in the past as this could lead to price instability.
Interest rates will likely rise a bit further
My prediction is for mortgage rates to stay about the same or possibly tick ½% higher base on deficit spending and inflation. Even if the federal reserve lowers rates later in the year, my baseline is still for mortgage rates around the same or possibly higher. The wildcard is if we go into a recession which is not currently in the cards but with rates remaining high, something could easily break that we haven’t anticipated.
Too soon to call all clear on the economy
In the last CPI numbers we had a huge decline in oil due to increased supply while at the same time eggs sharply declined due to a lessening of the bird flue. These items are one time events and can quickly get overrun with other upcoming price increases.
Although tariffs are not as bad as they were initially feared, at the end of the day someone still must pay the tariff as there is not enough margin to absorb the cost increases. Walmart, the world’s largest retailer, has the best pricing power in the industry due to its size, and is already sounding the alarm bells on higher prices. Eventually consumer prices will rise and inflation will increase. Couple these price increases with increasing deficit spending and we have a setup for higher rates heading into the later parts of 2025 and a federal reserve that is handicapped on whether to focus on its core of inflation or on the job market. Long and short, enjoy the sunshine of calm waters for a little while longer, but prices and the fed will make the economy considerably rockier towards the end of the year.
Additional Reading/Resources
- https://www.wsj.com/business/retail/walmart-tariff-raising-prices-economic-impact-714c10fd
- https://www.fairviewlending.com/why-are-mortgage-rates-rising-when-they-should-be-falling/
- https://fred.stlouisfed.org/series/MORTGAGE30US
- https://www.fairviewlending.com/2025-mortgage-rate-predictions/
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Glen Weinberg personally writes these weekly real estate blogs based on his real estate experience as a lender and property owner. I’m not an armchair reporter/writer. We are an actual private lender, lending our own money. We service our own loans and own commercial and residential real estate throughout the country.
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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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