August 18, 2026 – In Case You Are Wondering Why

Economic Commentary

A few weeks ago, the Federal Reserve’s Open Market Committee met to discuss Fed policy. All eyes were on the Fed as recent events in the Middle East had unleashed further pressure upon inflation. In the meantime, the Chairman of the Federal Reserve, Kevin Warsh, was conducting his first meeting. At the end of the day (or precisely Wednesday early afternoon), the Fed decided to keep their benchmark rate steady for the fifth straight meeting, which was not a surprise. It was also not a surprise that three members of the committee voted to increase interest rates in light of recent events.

Even though the Fed kept rates steady, the bond market forced longer term interest rates higher immediately. Thus, the question was – why did interest rates rise when the Fed kept their rates steady? When considering the circumstances, it is important to remember that the Fed’s benchmarks rates are very short-term and the interest rates which rose were longer-term rates. Thus, the spread between short-term rates and long-term rates widened. This explains what happened technically but does not explain the poor reaction from the bond market. To achieve that answer, we must dig deeper.

The Fed’s statement after the meeting acknowledged that inflation was elevated. That statement by itself would worry the bond markets, even though the Fed was stating the obvious. Moving further, in the face of elevated inflation, the Fed did absolutely nothing. It kept status quo. The bond market expects the Fed to be more vigilant in this regard. A stronger statement would have helped mitigate the reaction. Meanwhile, from a political standpoint, the Administration for months has been putting a lot of pressure on the Fed to lower interest rates and since the new chairman was the Administration’s pick, the markets are worried that the Fed won’t be vigilant enough. This concern comes despite the fact that Chairman Warsh has a history of being quite conservative in this regard.

Weekly Interest Rate Overview

The Markets. Mortgage rates eased slightly this week and continued to move lower after the survey period closed due to the encouraging inflation reports.  According to the Freddie Mac weekly survey, 30-year fixed rates fell to 6.67% last week from 6.69% the previous week. In addition, 15-year rates decreased to 5.96%. A year ago, 30-year fixed rates averaged 6.58%, 0.09% lower than today. Freddie Mac noted that housing affordability has improved from a year ago, and recent increases in purchase and refinance applications suggest that borrowers continue to respond to even modest changes in mortgage rates.  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

Perhaps the most consequential piece of the new landmark housing legislation involves an astonishingly simple change to a 50-year-old federal law. Manufactured houses, or mobile homes, no longer must have a permanent chassis, the steel under-frame used to transport the house and then left attached. The U.S. desperately needs more affordable starter houses for low- and middle-income folks currently priced out of the market, and some builders and housing advocates say this little tweak could help do the trick. Manufactured homes can cost from 27% to 65% less than comparable houses built on site, according to an estimate from the Niskanen Center. While most U.S. homes are “stick-built” on site, manufactured homes get built in factories. There are economies of scale — standardized materials, centralized purchasing, controlled weather conditions and a stable workforce (crucial at a time when construction labor is in short supply due to the immigration crackdown). Proponents say there’s more to it. Shedding the bulky steel structure under a house opens up a whole new array of design opportunities for these often-stigmatized homes. The change could make multi-story manufactured homes, lower-to-the-ground designs and basement installations easier and less costly — amping up their appeal. What they’re saying: “I think we’re going to see a lot of clever ways that people decide to use these homes,” says Joel Berner, a senior economist at Realtor.com. For example, it could make manufactured housing a more practical option for accessory dwelling units, or ADUs, which more states and cities are allowing as they face housing shortages. Yes, but: There are still roadblocks ahead. Many local zoning laws restrict the placement of manufactured housing, partly due to the stigma. HUD still has to write the standards to adopt the change, and states have one to two years to align their laws.  Source: Axios

Foreign buyers continue fleeing the U.S. housing market, with their activity falling 14 percent between April 2025 and March 2026 to the second-lowest level since the National Association of Realtors (NAR) started tracking purchases in 2009. Paige Terryberry, a senior research fellow at the conservative think tank Foundation for Government Accountability, made the point in a recent opinion piece for Fox News that “each home bought by someone from outside the U.S. leaves one fewer home for Americans to buy.”  Their decline in activity, then, should offer some modest relief to U.S. buyers, who are facing less competition for the available for-sale inventory across the country. Foreign buyers purchased 67,100 homes in the 12 months between April 2025 and March 2026—the equivalent of 1.7 percent of all home sales. That was down 14 percent from a year earlier.  In dollar terms, their purchases totaled $45.3 billion, or 2.0 percent of all home sales within that period, down 19 percent from a year earlier. Because they represent only a very small share of all U.S. home purchases, the withdrawal of foreign buyers from the market will have a limited impact on Americans. “The decline in foreign homebuyer activity mirrors the decline in international visitors and tourists to the United States,” NAR chief economist Lawrence Yun said in a statement.  The homes they bought were relatively more expensive than the ones purchased by U.S. residents—for a median price of $465,000 compared to $413,600—and nearly half of these (48 percent) were paid all-cash—something that, in the overall market, only happens in 28 percent of deals.  Source: Newsweek

Gen Z mortgage shoppers in the nation’s 50 largest metros plan to put down far less than any other generation, according to an analysis of more than 130,000 mortgage purchase inquiries submitted through the LendingTree platform.  However, not all younger shoppers plan to put down less. Millennials join baby boomers, the oldest generation in our analysis, in planning to make the largest down payments of any age group across the nation’s largest metros. Planned down payments also vary widely by metro, with Gen Z shoppers in two locations planning to make six-figure down payments. Key findings include the fact that, across the nation’s 50 largest metros, Gen Z mortgage shoppers plan to put down a median of $41,250, the lowest of any generation analyzed and 25% below the overall median of $55,000. Millennials and baby boomers tie for the highest median planned down payment at $65,000, while Gen X shoppers plan to put down a median of $56,250.  The gap is consistent with broader financial differences across age groups. On average, Gen Z adults tend to have lower incomes, lower credit scores and less home equity than older generations, making saving for a down payment a Herculean task for many people that age. Even so, the inquiry data shows many Gen Z shoppers are preparing to buy homes despite those challenges.  Source: Lending Tree