May 4, 2026 – Economic conditions continue to hold up overall, and the housing market is showing pockets of resilience. Output growth picked up early in the year, consumers are still spending, and sentiment has improved as job-market perceptions stabilize. In housing, starts ended the quarter on a firm note and rents are beginning to re-accelerate as the market heads into the peak moving season. Still, the outlook is more mixed looking ahead: softer permitting activity, elevated mortgage rates, and renewed inflation pressures tied to higher energy costs could create headwinds for both growth and housing activity in the months ahead.

U.S. GDP bounces back in Q1: The U.S. economy bounced back with an annualized increase of 2.0% in the Q1 2026, after a weak year-end 0.5% in Q4 2025 as a result of the six-week government shut-down in October and November. Strong business investment contributed the most to the overall growth in the first quarter, as private domestic investment surged by 8.7% with spending on equipment (17.2%) and intellectual property products (13%) both jumped by double-digits. Artificial Intelligence was likely the primary driver for the increases. Consumer spending continued to rise despite higher energy prices that curb consumers’ discretionary expenses, increasing at an annualized rate of 1.6% from the prior quarter. The latest growth pace was the smallest in the last four quarters though, which could be a sign that the U.S. consumer resilience is weakening. Government spending also staged a comeback with an increase of 4.4%, after dropping 5.6% in Q4 2025. With the geopolitical uncertainty remaining on the horizon and inflation becoming an issue again, growth in the second quarter could be curbed despite the economic boost stimulated by the extra tax refund.

Fed leaves policy rate unchanged at Powell’s last meeting as the chair: The Federal Reserve held the fed funds rate unchanged and kept it in the range between 3.5% and 3.75% in their latest Federal Open Market Committee (FOMC) meeting. As Fed officials navigate through the challenge of balancing inflation risks and labor market stability, the central bank found itself unusually divided in their last meeting. Four members of the FOMC dissented from the Fed’s monetary policy statement, with one dissented in favor of cutting the Fed’s policy rate and three opposed to the future rate-rate messaging in the meeting statement. The dissent is a signal that the odds of an interest rate cut this year could be even lower than previously thought. With global energy prices back on the rising trend and inflation likely to remain elevated in the upcoming months, markets are expecting the Fed not to lower rates until well into 2027. Powell presides as the Fed’s chair, as he is due to step down in mid-May. He plans to remain on the Board of Governor, however, until the renovation investigation has been completed and his term expires in January 2028.

Housing starts close Q126 with a solid note but permit slide in March suggests weak activities ahead: U.S. homebuilding activity bounced back in March after a slip in February and reached the highest level in 15 months. Total housing starts at the national level surged at the end of the first quarter, rising 10.8% in March to a seasonally adjusted annual rate of 1.502M from February’s 1.356M. The monthly jump was propped up by a 9.7% increase in single-family starts and a 13.2% increase in multifamily starts. On a year-over-year basis, overall starts also shot up 10.8% from March 2025 levels. The uptick in building activity was likely due to the decline in mortgage rates in February. The outlook for residential construction in coming months is less rosy, however, as permitting activity pulled back notably in March. Total building permits fell 10.8% month-over-month to 1.372M and was down 7.4% from last March’s levels. Single-family permits declined 3.8% from February and the multifamily segment dropped 21.6% from the prior month. With building material costs rising, mortgage rates remaining elevated, and geopolitical uncertainty lingering on, homebuilders could pull back further in the near term until there is more clarity.

Apartment vacancy rate may have turned the corner: The U.S. multifamily median rent climbed for the third straight month and will likely remain on the rising trend through the summer, according to Apartment List’s May National Rent Report. With the market gearing up for the busy moving season, the national median price inched up 0.5% month-over-month in April, registering its third consecutive monthly increase after six straight months of rent declines. On a year-over-year basis, however, rents were down 1.7% from 12 months ago and the drop remained the biggest dip on record since Apartment List started tracking in 2017. Multifamily vacancy rate at the national level ticked down to 7.2% after reaching 7.3% - the highest level since 2017 – in March. The dip was the first decline observed in over four years, which could be an indication that the vacancy rate might have hit its peak.

Consumer confidence ticks up again in April as job market perceptions improve: The U.S. Consumer Confidence Index inched up by 0.6 points in April to 92.8 from 92.2 in March, according to the Conference Board. The ceasefire announcement in early April, the recent rebound in stock market indices, and a string of encouraging news about the job market might have helped ease consumers’ concerns about their employment conditions and household income situations. The net views of the labor market improved moderately in April, with the share of consumers saying jobs were “plentiful” remaining the same, while the share who said jobs were “hard to get” dipping slightly. Homebuying expectations improved mildly on a six-month rolling basis on both existing and new home purchases, with consumers continuing to prefer existing homes over newly built housing units. With the duration of the Iran war remaining an unknown, consumer confidence could deteriorate in the months ahead if the U.S.- Iran negotiation remains stuck.

Note: This summary report gets updated every Monday by 6:00 pm PST. Feel free to email us at [email protected] if you have any questions and/or feedback.

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