November 4, 2025 – The Fed Speaks While The Government Sleeps

Economic Commentary

Every time the Federal Reserve’s Open Market Committee meets, it is a big event for the markets. This time around, the meeting carried extra significance for a few reasons. First, the delay of most economic reports due to the government shutdown meant that there was not only a dearth of data for the Fed to rely upon, but also there were fewer competing events such as the release of the monthly jobs report. Secondly, the slowing of the pace of hiring even before the shutdown started put pressure on the Fed to act in spite of the fact that inflation remained higher than the Fed’s goals.

It was no surprise that the Fed lowered their benchmark interest rate at their meeting last week. The markets expected this action. Some were predicting a .25% decrease and others felt that a larger 0.5% decrease was called for. Thus, the size of the actual 0.25% decrease seemed to be the major question. When the markets are calling for exactly what was delivered, the statement released by the Fed the same day is typically looked at more closely since it might give us a glimpse of the future. Despite not showing an inclination towards a December rate cut, in this case we had an indication of the Fed’s mindset because of the statement made by Chairman Powell in a public forum a few weeks before the meeting.

In that statement, Chairman Powell foresaw further rate decreases in the future.  More importantly, he also envisioned the end of quantitative tightening which put upward pressure on long-term rates such as mortgages. What this means is the Fed was letting expiring mortgages and long-term Treasuries run-off from their multi-trillion-dollar portfolio without replacing them, thereby reducing the size of the Fed’s holdings. When the Fed wants to lower long-term rates, they can purchase mortgage securities and Treasury bonds. When the Fed wants to support higher rates, they lay back and watch their portfolio dwindle. In this case the Fed would not be aggressively purchasing these instruments, but at least replacing the runoff, keeping their portfolio fairly level.

Weekly Interest Rate Overview

The Markets. Mortgage rates fell slightly last week continuing their downward trend. However, they did rise immediately after the Fed decision to lower short-term rates. According to the Freddie Mac weekly survey, 30-year fixed rates fell to 6.17% last week from 6.19% the previous week. In addition, 15-year loans eased to 5.41%. A year ago, 30-year fixed rates averaged 6.72%, 0.55% higher than today. Attributed to Freddie Mac: “Mortgage rates decreased for the fourth consecutive week. The last few months have brought lower rates and homebuyers are increasingly entering the market.” 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

According to ATTOM’s recently released Q3 2025 U.S. Home Sales Report, homeowners earned a 49.9 percent profit on typical single-family home and condo sales, up slightly from a 49.3 percent margin in the previous quarter but still below the 55.4 percent profit recorded in the third quarter of 2024. ATTOM’s latest home sales analysis reported that before 2020, home sellers typically saw profit margins of about 30 percent. As the Covid-19 pandemic drove many buyers to leave cities in search of more space, profits surged, reaching over 60 percent by mid-2022. Since that peak, margins have gradually declined but have remained just under 50 percent for the past three quarters. The report noted that meanwhile, home prices continued to climb, with the national median sales price reaching $370,000 in the third quarter of 2025, up 1.2 percent from the previous quarter and 3.4 percent year over year. Also, according to the report, the typical home sale generated a $123,100 profit.  This represents a 1.9 percent increase from the previous quarter, but still 3.5 percent below the level seen in the third quarter of 2024, a reminder that the market remains just below its recent peak. The profit margin represents the percentage difference between the median purchase and resale prices of homes within a given area. Metro areas were included in the analysis if they recorded at least 1,000 home sales during the third quarter of 2025 and had sufficient data to analyze.  Source: ATTOM

As climate risks intensify and home insurance premiums climb, a growing number of Americans are concerned about whether they can continue to afford homeowners insurance. These rising costs compound the financial strain already caused by high mortgage rates and elevated home prices. According to a recent Realtor.com survey, nearly half of recent and potential homebuyers have experienced or anticipate experiencing difficulties obtaining or renewing homeowners insurance, as over one in four homes in the U.S.—representing $12.7 trillion in real estate value—are at risk of exposure to severe or extreme climate risks. According to the survey, 42% of respondents have already acknowledged that their house insurance premiums have increased, and 88% of respondents think they will eventually have to pay more for their coverage. Remarkably, 75% of respondents think that homeowners insurance may eventually become too expensive. Some 58% of recent and potential purchasers responded to the study by saying that if the cost of homeowners insurance increased, they would or are likely to forgo it—some have already done so. Even though many Gen Z purchasers are using a mortgage and are therefore probably compelled to obtain homeowners insurance, this number rises to 76% among these young buyers. An additional 65% of respondents expressed concern about getting and keeping home insurance. “Homeowners insurance offers financial protection for consumers that may help cover damage to homes and personal property from an extreme weather event or fire, while also providing personal property and liability coverage,” said Danielle Hale, Chief Economist at Realtor.com. “But these benefits come with an upfront cost that has risen as weather events have become more frequent and impactful and rebuilding costs climb. Homeowners are looking for strategies to lower costs including adjusting their home searches and potentially short-charging or forgoing coverage altogether.”   One third (33.7%) of home searchers have been compelled to entirely alter the geographic location in which they are looking for a home due to insurance issues, and another 30% have broadened their search and extended their initial target territory. Due to insurance issues, over 25% of home searchers have entirely altered their tactics.  Source: Realtor.com

Demand is growing for vacation and investment properties that are priced below the $1 million threshold, according to a new report. But that’s a segment of the second home market developers have almost totally ignored.  While builders have more than satisfied the wealthiest segment of vacation and investment buyers, says RCLCO in its 2025 Vacation Home Investment Survey, they have failed to address the growing demand for lower-cost units. The Bethesda, Md.-based consulting company found that roughly three out of five qualified survey respondents are searching for product under $1 million. For them, the company said, smaller, more affordable units with lock-and-leave convenience and investment income potential are a high-priority. It used to be that many luxury buyers considered vacation properties as purely private retreats. But that attitude seems to be changing. In what the firm called “one of the clearest findings of the survey,” it discovered that two in five respondents indicated that generating investment income is a major justification for their purchase. That’s up from 33% when RCLCO last conducted the survey in 2023. The shift, the company said, is “likely driven by the abundance of professional rental management services.” As new vacation and investment home development expands, it says, turn-key rental management has become a critical decision factor for buyers.  Another factor, though, is “a generational divide” between age groups. “Younger buyers are more inclined to view rental participation as essential, while older buyers, who tend to be wealthier and can spend more time at their second homes, lean toward exclusive use,” the company explained. Source: National Mortgage Professional