July 22, 2025 – Back To The Fed

Economic Commentary

It has been a busy month with regard to economic news. We started the month with the passage of a huge tax and spending bill and the release of a stronger-than-expected jobs report.  These events were followed almost immediately with additional announcements of increased tariffs to be levied upon several countries. Of course, we should have suspected that these announcements were part of a strategy we will describe as “let the games begin.” In other words, there will be a lot of back and forth in this regard.

As the month progresses, there is always a plethora of economic data to follow. For example, last week we had readings on inflation.  In the past few months, inflation has continued to ease, but the analysts seem to be waiting for the other ball to drop in the form of tariff-induced inflation stimulation. This month the most important report is the release of the first estimate of economic growth for the second quarter.  The release of the GDP estimate will happen the morning of the second day of this month’s Fed meeting – July 30th.

What makes this number important? We experienced negative economic growth in the first quarter. A second quarter of negative growth will certainly raise the specter of a recession. Thus far, the Fed has been banking on the resilient job market to fend off a recession while they assess the effect of tariffs on inflation. A negative growth rate for the second quarter could signal to the Fed that all bets are off in that regard. On the other hand, a positive report could ensure that the Fed will stay on the sidelines for a few more months.

Weekly Interest Rate Overview

The Markets. Mortgage rates moved slightly higher for the second consecutive week. A slight up-tick in consumer inflation and rumors regarding the fate of the Fed Chairman caused moderate reactions. According to the Freddie Mac weekly survey, 30-year fixed rates rose to 6.75% from 6.72% the previous week. In addition, 15-year loans increased to 5.92%. A year ago, 30-year fixed rates averaged 6.77%, virtually the same as today. Attributed to Freddie Mac: “The 30-year fixed-rate mortgage inched up this week and continues to stay within a narrow range under 7%. While overall affordability headwinds persist, rate stability coupled with moderately rising inventory may sway prospective buyers to act.” 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

Mortgage Research Network released a new study finding that high-credit score buyers buying a home with a low-credit spouse could pay an average additional $63,000 over their average homeownership tenure. That works out to an average of $437 in additional cash per month, or a 14.4% increase. Mortgage Research Network defined a high-credit score buyer as someone with a score above 760 and defined a low-credit score buyer as someone with a score below 640. The added $63,000 comes from a mix of higher interest rates, steeper mortgage insurance premiums and more expensive homeowners insurance. “Research has long shown that couples with similar and higher credit scores are more likely to stay together, but our study highlights another important reason to pay attention to credit before tying the knot,” said Tim Lucas, Lead Analyst at Mortgage Research Network. “Beyond relationship stability, a partner’s low credit score can significantly increase the cost of buying a home, most people’s biggest investment, by thousands of dollars over time. Understanding these financial impacts early can help couples make smarter decisions together.”  Source: The Mortgage Bankers Association

The modern 55 and older homebuyer isn’t looking to sit all day on a recliner pondering end of life options. Longer lifespans, greater health, increased affluence and current sensibilities about aging are transforming the neighborhoods designed for late Boomers and Gen X homebuyers. “We know the story: the 55-and-older population will grow by 12 million between 2025 and 2033,” notes managing principal of John Burns Research and Consulting firm Ken Perlman. “These aren’t your grandparents’ active adult buyers. They are healthy, wealthy, and tech-savvy.” According to Perlman, these are what this homebuyer is seeking. “For 55 plus consumers who plan to move, proximity to family and friends is the top factor influencing location,” Perlman reports. Those moving to be closer to adult children and grandchildren have a nickname and a trend: “Baby chasers.” The pandemic drove home the value of being close to relatives, especially for those families that need help with eldercare or childcare.  Friend circles are also impacting where older adults choose to move, particularly for singles without children. Co-housing and co-living (“Golden Girls” style) is one option some are seeking, with numerous advantages for those choosing one of them.  According to Perlman, new home developers are looking closely at what our 55-plus generations want. Given that they represent 30% of today’s population and now control 73% of total U.S. net worth, (according to John Burns Research and Consulting’s Bureau of Labor Statistics tabulations), their preferences are being taken seriously:  “The new 55 plus consumers are seeking a community that gives them a sense of purpose, promotes healthy living, and offers services and amenities without the burden of high maintenance or isolation. The best age-qualified / active adult communities will blend a variety of housing products from ‘forever homes’ to low upkeep, attainable luxury in locations that are proximate to friends and families,” Perlman suggests. Source: Fortune

ATTOM released its first quarter 2025 U.S. Home Equity & Underwater Report, which shows that 46.2 percent of mortgaged residential properties in the country were considered equity-rich in the first quarter, meaning the combined estimated amount of loan balances secured by those properties was no more than half of their estimated market value. The proportion of equity rich homes was down from 47.7 percent in the fourth quarter of 2024 and has dropped each quarter since a peak of 49.2 percent in the second quarter of last year. The rate is still historically high, however, and nearly double what it was in the first quarter of 2020. The percent of seriously underwater homes nationwide—those where the combined estimated balance of loans secured by the property is at least 25 percent more than the property’s estimated market value—ticked up from 2.5 percent in the fourth quarter of 2024 to 2.8 percent in the first quarter of 2025. “Home equity rates are near their highest points in recent years and the dip we’ve seen early this year in the proportion of equity-rich homes shouldn’t cause too much concern,” said Rob Barber, CEO for ATTOM. “In each of the two previous years, the first quarter marked the lowest point of the year before the proportion of equity-rich homes shot back up in the second quarter.”  The nationwide proportion of mortgaged homes considered seriously underwater has remained steady between 2 and 3 percent since early 2023. At 2.8 percent of homes in the first quarter of 2025, the rate is less than half of what it was during the first quarter of 2020 (6.6 percent). Source: ATTOM