August 12, 2025 – Does It Matter?

Economic Commentary

This week the markets are still digesting the plethora of economic events which occurred during the last week of July and August first.  However, there is no time to catch our breath as a new month of data starts this week with readings on inflation.  We have had some good inflation readings during the first part of the year, but we also have had warnings about the effects of tariffs that we have not yet felt. Indeed, last month’s release was the first indication that inflation could be heating up. Hopefully that is not the start of a trend.

Speaking of inflation, it is the Federal Reserve’s mission to balance the promotion of economic growth against the threat of inflation. This is a job which is not easy. This body has always been completely independent from Congress and the Executive Branch and for good reason. You might say – economics over politics.  There has been not so subtle indications that Fed Chair Powell might be subject to dismissal.  But does it matter?  When the rumors first surfaced the markets reacted severely.  But like the tariffs, as time went on there has been less of a reaction to such threats. 

One thing we continue to remind our readers.  The Fed lowering short-term rates does not always equate to a corresponding reduction in long-term rates such as mortgages. When the Fed lowered rates during the second half of last year, mortgage rates did not fall. Why?  Because there was no evidence that the fight against inflation was finished.  Which brings us back to this week’s report.  We need to continue to see progress on the inflation front for the Fed to be comfortable lowering rates again AND for long-term rates to respond in the same manner. The recent weak jobs data almost guarantees the Fed is likely to lower rates at their next meeting – IF inflation is not being rekindled.

Weekly Interest Rate Overview

The Markets. Mortgage rates eased in the past week in reaction to the weak jobs data released the previous Friday. The employment report showed that job growth slowed down over the previous three months.  According to the Freddie Mac weekly survey, 30-year fixed rates eased to 6.63% from 6.72% the previous week. In addition, 15-year loans decreased to 5.75%. A year ago, 30-year fixed rates averaged 6.79%, slightly higher than today. Attributed to Freddie Mac: “The 30-year fixed-rate mortgage dropped to its lowest level since April. The decline in rates increases prospective homebuyers’ purchasing power.” Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Real Estate News

Redfin released a study finding that 33.5% of Baby Boomers who currently own their homes say they’ll “never sell.” Thirty percent of that group said they would sell, but not within the next decade. The Silent Generation is even less likely to report being willing to sell, with 44.6% saying they’ll “never sell.” Meanwhile, 25% of Gen X and 21% of Millennials and Gen Z say they’ll “never sell.” Redfin noted that most Baby Boomers don’t have a financial incentive to sell and have been in their homes for a long time–67% have been in their current house for 16 years or more. Overall, 55% of Baby Boomers say they like their home and have no real reason to move. Thirty percent said that they wouldn’t sell because their home is almost or completely paid off, 16% said today’s home prices are too high and 8% don’t want to give up their current low mortgage rate. “While inventory is improving, supply is tight for young house hunters looking for family homes, especially in suburban areas where homes priced like starter homes–yet large enough for families–are scarce,” said Redfin Chief Economist Daryl Fairweather. “With Baby Boomers opting to age in place rather than sell, it’s challenging for younger buyers to find affordable options that fit their lifestyle. But it’s worth noting that even though many older Americans say they’re not planning to sell their homes, many are likely to eventually part ways as it becomes harder to live independently and/or keep up with home maintenance.”  Source: RedFin

From 2020 to 2024, sales of lower-priced new homes declined significantly as the market moved toward higher-priced segments. Rising construction costs—driven by inflation, supply chain disruptions, and labor shortages—as well as higher regulatory costs, made it increasingly difficult for builders to construct affordable homes. Data from the U.S. Census’s Survey of Construction (SOC) shows that total sales of new single-family homes declined by 17% during the 2020—2024 period. Meanwhile, the median sales price of new single-family homes increased significantly, rising from $330,900 in 2020 to $420,300 in 2024. This steep rise in sales price has placed additional pressure on prospective home buyers, particularly those seeking homes in the lower-priced segments. Between 2020 and 2024, the market for new single-family homes experienced significant shifts in the distribution of sales by price range. Most notably, there was a sharp decline in sales of lower-priced homes. Homes priced under $300,000 experienced a 65% decline in sales, while sales of homes priced between $300,000 and $399,999 fell by 10%. In contrast, higher-end segments saw substantial growth, with sales of homes priced between $800,000 and $999,999 more than doubling and those priced at $1,000,000 or more increasing by 85%.  The market share of lower-priced homes declined dramatically. In 2020, homes priced under $300,000 accounted for 40% of the total new single-family home sales, making them a dominant category. By 2024, this category had dropped to the third largest. Meanwhile, the share of higher-priced homes expanded, reflecting a broader shift toward more expensive construction and away from affordability. Source; National Association of Home Builders

A dangerous myth is exposing millions of American families to financial risk: 58% believe Medicare will cover long-term care (LTC) expenses, according to the 2025 Nationwide Retirement Institute Long-Term Care survey of U.S. adults age 29+ with household income $75,000+. In reality, Medicare’s LTC coverage is limited and short-term, and does not provide the extended, day-to-day support aging Americans will eventually need. As Americans live longer than ever – with the U.S. Census Bureau projecting the number of centenarians to quadruple by 2054 – the likelihood of needing LTC, and needing it for many years, is rising sharply. And many are not ready: 41% of Americans doubt they will live long enough to use long-term care insurance, even though nearly 70% of Americans turning 65 today will need LTC.  The financial strain of long-term care is already felt as these expenses are increasing sharply across all care types. More than half of Americans, 58%, are concerned about their ability to pay for their or their partner’s LTC and a shocking 59% say they plan to use Medicaid to help pay for those expenses. This suggests many expect to spend down savings enough to qualify for the safety net program intended for individuals with limited income and assets – one currently under threat of major cuts.  Many see aging at home as a way to avoid rising costs, but it’s not necessarily without challenges. While 77% of Americans would prefer to receive long-term care in their own home, 41% say their current home may not be safe or accessible for aging in place, and nearly half, 47%, say they expect modifying their home for aging in place to be unaffordable. Source: Reverse Mortgage Daily