August 25, 2026 – The Fed Has Another Worry

Economic Commentary

In our last commentary we discussed the Federal Reserve’s reaction to what they termed “elevated inflation.”  The recently released minutes from their last meeting and several speeches delivered since that meeting have served to indicate that there are Fed Governors who are ready to increase interest rates in the near future. Instead, they woke up to a big surprise during the early part of August. Employment data for the month of July revealed that 23,000 jobs were shed, In addition, the previous two months of job gains were revised downward by 103,000 jobs.

Taken together, that is a loss of 126,000 jobs. Since the economy has been adding only about 30,000 jobs per month over the past year, that number is extremely significant. Taken together with recent data showing a 1.5% growth rate for the economy during the second quarter (subject to revisions) – the Fed has another worry on their hands.  That worry is slowing economic growth. It will be that much harder for the Fed to raise interest rates if the economy is not growing strongly enough. They can’t lower rates in the face of elevated inflation, and they can’t raise rates because of slow economic growth. That is called being between a rock and a hard place.

The good news is that the Fed is not meeting in August. Their next meeting is in mid-September. By that time, we will have another jobs report to chew on, as well as one revision of the measure of economic growth for the second quarter. Plus, there will be a few inflation readings as well. Let’s hope that the economy reverses some of these job losses and inflation eases as the situation in the Middle East calms down. Leaving rates steady would not be as much of a concern if these two scenarios come to fruition. In the above forementioned “rock and hard” place situation, this is the best we can hope for. We won’t have to wait very long to see some evidence as the Fed’s favorite inflation statistic is due out this week and the jobs report for August will be released at the end of next week.

Weekly Interest Rate Overview

The Markets. Mortgage rates eased slightly again this week. Two conflicting forces caused a significant amount of volatility. The lack of progress in the Middle East pressured rates higher while the Treasury initiated an expanded bond buyback program which helped alleviate this pressure. According to the Freddie Mac weekly survey, 30-year fixed rates fell to 6.65% last week from 6.67% the previous week. In addition, 15-year rates decreased one tick to 5.95%. A year ago, 30-year fixed rates averaged 6.58%, 0.07% lower than today. 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

Home prices rose in 80% of metro markets in the second quarter of 2026, up from 71% last quarter, according to the National Association of REALTORS®’ latest report. The data points to stronger homeowner equity and continuing affordability challenges for buyers.  The median price for a single-family existing home in America is now $434,900, up 1.5% compared to this time last year.  NAR Chief Economist Lawrence Yun explained how home prices fit in the larger context of closed transactions, weighing additional economic forces.  “Home sales increased despite mortgage rates rising. This testifies to the potential housing demand building up from steady job and income gains,” Yun said. “Sales rose in three of the four major regions, with the South leading the way due to faster job growth. The Northeast was the exception, held back partly by slower job growth and faster-appreciating home prices, which hurt affordability.”  Yun added, “It is welcoming to see incomes rising faster than home prices, which has helped boost affordability—but the big short-term challenge to affordability is coming from rising mortgage rates.” NAR data shows that year-over-year the typical monthly mortgage payment is down. Those who bought an existing single-family home with a 20% down payment in the second quarter of 2026 are paying roughly $52 less per month than last years’ buyers. Housing costs are also eating up less of those groups’ household incomes. Typical families are now spending 23.8% of their income on their mortgage payments, down from 25.5% last year.  Source: MP Daily

Americans need to earn nearly $110,000 a year to comfortably afford the typical home for sale in the United States, even as housing affordability has shown modest signs of improvement over the past year. A  Redfin report found that a household would need an annual income of $109,796 to purchase the median-priced U.S. home in June 2026 while spending no more than 30% of said income on housing costs. That’s 0.5% lower than the record high of $110,382 a year ago, meaning the income needed to buy a home has changed very little over the past year. The stabilization comes as household incomes have continued to rise alongside home prices. Redfin estimates the median U.S. household earned $87,599 in June, up 4% from a year ago, while the median home sale price increased 2.2%. Mortgage rates also eased slightly but remained in the mid-6% range, keeping borrowing costs elevated.  Even with those gains, according to Redfin, the typical household still earns about $22,200 less than what’s needed to purchase the median-priced home and be financially comfortable. That’s an improvement from the roughly $26,100 gap a year ago, and nearly $28,900 two years ago.  Redfin Senior Economist Yingqi Xu said that the market has become “a bit more manageable” for buyers because it is now a “buyer’s market” in much of the country, giving shoppers more options and stronger negotiating power.  Source: USA Today

If the Baby Boomer generation had a theme song for today’s housing market, it might be “Born to Run” – and the numbers back it up. According to the 2026 Home Buyers and Sellers Generational Trends Report, buyers aged 61 to 79 remain the largest generational force in home buying, accounting for 42% of buyers (unchanged from last year) and an impressive 55% of sellers. Behind those numbers is a generation using its market power with purpose, making moves guided as much by lifestyle and relationships as by financial leverage. Many Boomers are making moves rooted in relationships and lifestyle. Like the road trips of “Easy Rider,” proximity matters: 31% of Older Boomers (ages 71–79) and 23% of Younger Boomers (61–70) bought homes to be closer to friends and family. Downsizing is also part of the story. Sixteen percent of Older Boomers said they purchased a home specifically to downsize, compared to 11% of Younger Boomers. Meanwhile, 15% of Younger Boomers bought homes with retirement in mind. Flexibility is a hallmark of this life stage, and often housing equity makes that choice easier. Veterans make up a significant share of this group. Twenty-eight percent of Older Boomers and 18% of Younger Boomers served, with VA loans playing a key role: 16% of Older Boomers and 14% of Younger Boomers used VA financing. Boomers are also more likely to own additional property. Six percent of both Younger and Older Boomers own one or more vacation homes. Senior-related housing is especially popular, with 23% of Older Boomers and 13% of Younger Boomers choosing these communities. Financially, many Boomers are entering their “cash-is-king” era. Thirty-nine percent of Younger Boomers and 46% of Older Boomers paid all-cash for their homes. Among those who financed, more than half used proceeds from selling their prior residence for the down payment. Source: National Association of Realtors