Tariffs, Inflation… or Recession? What It Means for Real Estate in California and Washington

In this week’s market update, we’re diving into the renewed tariff discussion and the complicated web of impacts it may have on our economy—and by extension, on mortgage rates and the real estate market in Southern California and Washington.

The conversation around tariffs often centers on inflation. After all, tariffs act as a tax on imported goods, which leads to higher prices. But a recent interview shared by MBS Highway with economist Lacy Hunt raises a more sobering possibility: tariffs may actually lead to a recession in the long run.

Here’s the logic: in the short term, yes—tariffs are inflationary. But as consumers face rising costs, discretionary spending could slow down significantly. That demand drop can contract the economy, potentially pushing us into a recession. And while recessions often lead to lower interest rates (a potential silver lining for mortgage borrowers), they also bring job losses and instability.

From a real estate and mortgage perspective, this creates a tricky situation. We all want lower rates—but not at the cost of a shrinking economy.
👉 For buyers, it could mean lower rates ahead, but with more uncertainty.
👉 For sellers, the window to list while consumer confidence is relatively stable may be now.
👉 For real estate agents, staying informed on macroeconomic forces like tariffs helps guide your clients wisely.

The key takeaway? Watch the bond market, stay tuned to inflation data, and prepare for the possibility of a rate shift driven by recession rather than relief.
📍Whether you’re buying in the Southern California housing market or relocating to Washington state, it’s essential to stay ahead of trends that impact your purchasing power.