Average 30-yr mortgage rates jumped last week, as reaccelerating inflation pushed global bond yields higher. Yet despite higher mortgage rates, April pending home sales still rose (for the 3rd-straight month).

Closer to 7% than 6%. It pains me to write this. Mortgage News Daily reported that average 30-year mortgage rates touched 6.75% on May 19. Freddie Mac’s weekly PMMS on 5/21 put the same figure at 6.51%. We all know why US bond yields and mortgage rates are going up: Iran conflict → high oil/other prices → increasing risk the Fed will have to RAISE rates to combat resurgent inflation.

ADP weekly job report showed continued improvement. For the four weeks ended 5/2/2026, private employers added an average of 42,250 jobs per week, implying a monthly run-rate of nearly +170K jobs. That’s the 2nd-highest weekly figure we’ve seen since ADP began publishing its “NER Pulse” report in July 2025. [ADP]

TP: As a reminder, ADP’s (private) monthly figure for April was +109K, while the BLS’ (private + gov’t) figure was +115K. ADP’s May monthly figure will be out on June 3 — anything above 150K would be considered a significant “beat”.

Surprisingly resilient pending home sales. In April, the NAR’s Pending Home Sales Index climbed 1.4% MoM (+3.2% YoY) to 74.8 — the highest level since Nov 2025 — DESPITE higher rates. In fact, this is the 3rd month in a row that we’ve seen the PHSI rise MoM. [NAR]

TP: Nice to see the recent improvement, but that index level (74.8) is basically telling you that existing home sales are still stuck at a pace of around 4 million units annually. We’re still bumping along the bottom.

Similar story for builder confidence. The National Association of Homebuilders’ HMI index climbed 3 points to 37. But 37 is low. 50 is the breakeven point between bullishness and bearishness. [NAHB]

Those capital gains exclusions aren’t so big anymore. The current capital gains tax exclusion thresholds of $250K (single)/$500K (married) were set in 1997. Since then, home prices have risen 3.5x. As a result, an estimated 13.1 million homeowners (15% of total) have gains that are above the thresholds. A good share of those homeowners are in California, where million-dollar homes are common. But rapid price growth in states like Idaho, Utah, Arizona and Nevada has widened the tax net.

Bond and Mortgage Market

According to Freddie Mac’s weekly PMMS survey, average 30-year mortgage rates jumped from 6.36% last week to 6.51% this week. Mortgage News Daily, meanwhile, has average 30-year mortgage rates at 6.65% (5/21). As you can see below, the probability that the Fed keeps rates steady at its upcoming meetings has dropped. But that’s because the probability that the Fed is forced to hike interest rates has risen.

Note: The Fed Funds Rate policy range is currently 3.50–3.75%. The probabilities below come from the CME Group website and are implied from the Fed Funds Rate futures market.

• June 17 FOMC Meeting: This will be Kevin Warsh’s first meeting as the new Fed Chairman. 97% probability that the Fed Funds Rate will be kept at 3.50–3.75% (was 99% last week).
• July 29 FOMC Meeting: 84% probability that the Fed Funds Rate will be kept at 3.50–3.75% (was 99% last week) 13% probability that rates will be 25 basis points higher than they are today.
• September 16 FOMC Meeting. 72% probability that the Fed Funds Rate will be kept at 3.50–3.75% (was 88% last week). A 24% probability that rates will be 25 basis point higher than they are today (was 11% last week).
• Rate hikes in late 2026? If I look way out to the last FOMC meeting of the year (Dec 9), the market is pricing in a 46% probability (was 62% last week) that the Fed Funds Rate will be exactly where it is today. Additionally, the market is now pricing in a 52% probability that rates will be at least 25 basis points (and maybe 50 basis points) HIGHER by year-end.

They Said It

“Pending home sales in April 2026 increased across the board, with month over month sales rising in the Northeast, Midwest and West, while declining in the South. Buyers are coming out with cautious optimism despite increasing economic uncertainty and a slight rise in mortgage rates.

[But] unless supply meaningfully increases, home price growth could outpace wage growth and further erode the homeownership rate. All efforts need to be focused on boosting housing supply.” — Lawrence Yun, NAR’s Chief Economist