February 3, 2026 – It is Always About Jobs

Economic Commentary

After the end of the government shutdown, the economic data has trickled in steadily as the government reports get back on track. We must admit, it has been hard to interpret most of this data.  For one, most of the reports have been outdated when they were released. Secondly, the data itself has been questionable because surveys or other methods of data collection may not have been completed at the appropriate time.  Finally, the data itself seems to be “all over the board.”

For example, we have had some very surprisingly strong reports such as the third quarter economic growth (GDP). And we have had some comparatively weak data as well, especially within the employment sector and measures of consumer confidence. One must remember that there were unique factors affecting this data in addition to the government shutdown.  We have previously mentioned the reduction in legal immigration, but there also have been the implementation of major tariffs and several international incidents such as the intervention in Venezuela and the ongoing controversy surrounding Greenland.

But when you strip all the noise and uncertainty away, the highlight of the economy is the employment sector. The creation of jobs spurs consumer spending, which in turn becomes the engine that fuels economic growth. That is why the first employment data of 2026 to be released this week is so important. We ended the year in a slump with regard to the addition of jobs. It is hopeful that the growth in jobs stabilizes and perhaps begins to grow again. Not so much that it discourages the Federal Reserve from lowering interest rates.  The Fed’s first meeting of the year just concluded, and their statement released after the meeting certainly referred to employment situation as they decided not to lower interest rates for the time being.  You can be sure that the Fed will look closely at Friday’s jobs report as they consider their next move.

Weekly Interest Rate Overview

The Markets. Mortgage rates were stable in the past week. The survey period was closed before the Fed decision to pause rates, but there was little further market reaction to the decision. According to the Freddie Mac weekly survey, 30-year fixed rates rose one tick to 6.10% last week from 6.09% the previous week. In addition, 15-year loans increased to 5.49%. A year ago, 30-year fixed rates averaged 6.95%, .90% higher than today. Attributed to Freddie Mac: “Mortgage rates remain near their lowest levels in three years, which is encouraging for potential homebuyers who have waited to enter the market for some time. Lower rates and strong income growth, have led to a steady increase in purchase applications compared to last year. More homeowners refinancing their mortgages are also benefiting from these lower 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

Although real estate activity is still far below pre-pandemic levels, the end of the year’s upward trend indicates that the housing market is gradually thawing. More sales activity is being encouraged by a number of reasons, but it is still being impeded by others. Even if mortgage rates don’t decrease much from this point on, affordability is improving, which is crucial. Affordability rose to its highest point in over three years, according to First American’s most recent Real House Price Index (RHPI). The majority of markets enjoyed yearly increases in affordability, indicating widespread improvements. Since April 2025, income growth has outpaced the appreciation of housing prices, which is progressively improving the monthly payment calculations of potential buyers and making it possible for more households to qualify at the margin. Affordability is still not “easy” in absolute terms, even though the trend line encourages more transactions. Inventory is cooperating at the same time. Active inventory is already higher than it was a year ago in several markets, which is a significant change following years of incredibly limited availability. More listings increase options, lessen buyer fatigue, and facilitate the closing of deals, particularly for purchasers who have been willing but unable to locate a house that meets their requirements and financial constraints. “You can’t buy what’s not for sale, so cautious optimism for 2026 hinges on a rising tide of more ‘For Sale’ signs helping spur a few more sales,” said Odeta Kushi, Deputy Chief Economist at First American. When the market gives demographic dynamics a little oxygen, the demand manifests itself because demographic trends constitute built-in demand. A lot of prospective first-time millennial homeowners have been waiting for things to get better, and even little increases in affordability can encourage that demand to return to the market. Additionally, having more options can mean the difference between waiting and moving for households on a life-event timeline. Source: MP Daily

According to the U.S. Department of Labor, families across the country spent between 8.9% and 16% of their median income on full-day childcare for just one child in 2022. Rising childcare expenses continue to strain family budgets, which may help explain the historic decline in the share of home buyers with children under 18 recorded in 2024. In 2024, NAR’s Profile of Home Buyers and Sellers recorded a historic low in the share of home buyers with kids under the age of 18, at 27%.  Home buyers with kids under 18 are predominantly concentrated among the millennial and Gen X generations. Older millennials make up the largest share of buyers with children (43%), followed by Gen X at 28% and younger millennials at 18%. In contrast, buyers without children tend to be older, with the largest share among younger boomers (33%) and older boomers (21%). The median age of home buyers with children is 41, while those without children are significantly older at 62, reflecting distinct life stages and housing needs across generations. When it comes to home buyers with kids, married couples clearly lead the way, making up 75% of this group overall. This trend holds steady among first-time (70%) and repeat buyers (78%).  Rising economic pressures and evolving family dynamics are driving a growing number of home buyers with kids to opt for multigenerational living arrangements. One in five (20%) home buyers with kids purchased a multigenerational home last year. Sixty-three percent of multigenerational homes with kids have three or more income earners. For families with children, the rising cost of childcare continues to creep into every corner of the homebuying process. Yet even in this housing market, families press on by sharing space, combining incomes, and finding creative ways to keep the lights on, proving that the pursuit of homeownership remains one of the most resilient stories in the American dream. Source: NAR

A report from Bankrate finds that typical households earning the median income are priced out of more than 75% of homes on the U.S. market. The typical U.S. household earns almost $80,000 per year, according to Claritas estimates of U.S. Census Bureau data. Yet homebuyers would need to earn $113,000 per year to afford a median-priced home, as of July 2025. To show how tough the market is for would-be buyers, Bankrate looked at a key statistic: the share of available homes in a given real estate market that are affordable to the typical household. In most major metros, only a small fraction of homes for sale are within reach for the median household income.  “For many families, the challenge isn’t just high home prices and elevated mortgage rates. It’s that housing shortages across the country have left them with far fewer homes they can afford,” Bankrate Data Analyst Alex Gailey noted. “When only a sliver of the market is affordable to the typical household, homeownership starts to feel less like a milestone and more like a luxury.” “Affordability looks very different depending on where you live. Some large cities still give median-income households a path to buying a home, while others have become increasingly difficult to break into,” Gailey added. “For aspiring homeowners, the best approach is to stay adaptable and know your numbers. Get preapproved, set a firm budget, broaden your search and stay open to different home types”  Source: Bankrate