March 24, 2026 – The Fed Has Spoken

Economic Commentary

The Federal Reserve met last week and, as we indicated in our last commentary, it appeared to be a whole new ball game.  In the past several weeks news has been quite tumultuous, to say the least. First, our country started an all-out assault upon Iran in the Middle East. Considering the circumstances, it is no wonder that oil prices started to escalate immediately. Of course, higher energy prices are quite certain to exacerbate the threat of inflation, which is concerning to a Federal Reserve whose primary objective is to bring down the rate of inflation.

In addition, a prolonged military conflict will have an inflationary impact upon the economy in the long run because war is expensive. For example, in the first days of the assault, we were burning through a billion or so dollars per day because missiles are expensive. The result will be increased government spending which will mean that the government will have to borrow more money which also puts additional upward pressure on interest rates. Thus, higher energy prices will affect rates and inflation in the short-run but the long-term effects can be just as severe if the conflict continues.

It is no wonder that the stock market reacted so negatively to the on-going conflict. All this means that the Fed should have been more reticent to lower rates last week.  However, there were other intervening factors. The government also released a jobs report showing that the economy lost 92,000 jobs last month. In addition, retail sales fell in January, indicating that consumers are spending less money. This economic news certainly supports the argument for lower interest rates. Together, these factors certainly put the Fed in a very unenviable position. What did they do? The Fed decided to keep rates unchanged which was no surprise, especially considering the latest producer price report showing inflation continuing to be stubborn.

Weekly Interest Rate Overview

The Markets. Rates continued to increase this past week as the markets continued to react to energy prices rising due to the conflict in the Middle East. This is causing volatility across the markets. According to the Freddie Mac weekly survey, 30-year fixed rates rose to 6.22% last week from 6.11% the previous week. In addition, 15-year loans increased to 5.54%. A year ago, 30-year fixed rates averaged 6.67%, 0.45% higher than today. Attributed to Freddie Mac: “The 30-year fixed-rate mortgage edged up this week to 6.22% but remains nearly half a percentage point lower than the same time last year. Potential homebuyers are poised for a more affordable spring homebuying season than last with the market experiencing improvements in purchase applications and pending home sales.” 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

For today’s first-time homebuyers, getting a toehold into the pricey housing market increasingly means buying a townhome. Townhomes are making up a growing percentage of the for-sale market around the country, a testament to their relative affordability compared to single-family homes, as well as how homebuilders are leaning into growing demand for cheaper homes and higher-density neighborhoods.  Townhomes are proliferating not only in denser regions where they’ve been a major presence, like Baltimore and Philadelphia, but also in smaller cities from Lancaster, Pa., to Sioux Falls, S.D. They’re likely to become an even bigger part of the market in the coming years: Attached homes made up nearly 20% of single-family housing starts in the third quarter of last year, averaging their highest market share in recent quarters since 1985. “I’ve been pointing to it as one of the bright spots in a housing market in 2025 that disappointed,” said Robert Dietz, chief economist at the National Association of Home Builders.  Kailen Yost, a real estate agent in Johnstown, Colo., said the dream for most of her buyers is still a detached single-family home. But in the Northern Colorado counties where she works, average prices range from $537,000 to $659,000 — out of reach for many first-time buyers. “Single-family homes still are probably the most popular option,” Yost said. “First-time homebuyers, though, are definitely leaning in more towards the townhome because it’s more affordable. Single-family is more for that second leap.”  The cost savings for purchasing a townhome instead of a detached single-family home can be substantial. In recent years, through both the pandemic boom and the more recent market freeze, townhomes have been roughly 10% cheaper on average than single-family homes, Realtor.com found. “It’s positioning itself against single-family homes as an easier maintenance option at a better price,” said Joel Berner, senior economist at Realtor.com.  Source: Yahoo Finance

The U.S. housing supply gap widened to an estimated 4.03 million homes last year, increasing from 3.8 million in 2024, according to the 2026 Housing Supply Gap Report from Realtor.com. The report noted new construction once again fell short of household formation and pent-up demand from younger households persisted. Approximately 1.41 million households were formed in 2025, compared with 1.36 million housing starts. While the annual shortfall of roughly 50,000 units may appear modest, it adds to more than a decade of underbuilding that has constrained supply, fueled home price growth and pushed homeownership further out of reach, particularly for younger Americans. “Even when annual construction and household formation are roughly balanced, the market is still digging out from more than a decade of underbuilding,” said Danielle Hale, chief economist at Realtor.com. “A supply gap exceeding four million homes underscores how deeply rooted the shortage has become.” Hale noted that, without a sustained increase in housing supply, particularly in areas with strong job growth and persistent demand, affordability challenges will continue to sideline many would-be buyers. 2025 marked the third-largest annual deficit since 2012, trailing only 2020 and 2023. “Although the largest single-year gap occurred in 2020 during pandemic-related disruptions, recent deficits reflect more persistent structural imbalances between supply and demand and the difficulty of making sustained progress against the gap,” the report said.  Source: Realtor.com

Home equity moved from a dormant asset to an active retirement lever, not a last-resort cash line. Consumers recalibrated their thinking about reverse mortgages, and originators watched the shift because it changed who qualified as a viable client. “I think people are looking at their home equity as they get closer to retiring, and they’re wondering how they can use that money during retirement, especially since it’s the largest asset for a lot of people,” Ben Sillitoe, president of Retire Right Mortgage, told Mortgage Professional America. “A lot of consumers are starting to see reverse mortgages for exactly what they are. They’re just another financial tool that might be useful to them during retirement.”   Legitimacy was fueled by a decade-plus of analysis in retirement research circles.  “There have been a lot of improvements to the product over the years, but I believe the main development that has been the emergence of research in the past 10 to 15 years, which has shown the reverse mortgage to be very effective at mitigating one of the main risks during retirement, which is running out of money during a potentially long retirement,” Sillitoe said. “And research has shown the HECM to be pretty effective at reducing that risk when it’s used appropriately. So, the financial planning industry is starting to notice that, especially with the unprecedented amount of home equity. that people have accumulated over the last several years.”  The evidence base put structure around when and how to use home equity alongside investment portfolios, and that framing resonated within planning circles.   With costs rising and longer horizons at play, the borrower’s profile widened. “The new borrower profile is pretty much anyone in the right age range with enough equity to qualify for the HECM,” he said. That included households that were not strained monthly cash flow but wanted a buffer against market shocks. “Even if your client might not be worried about running out of money during retirement, it could still be used to preserve their net worth in retirement.”   Source: Mortgage Professional America