October 14, 2025 – The More Things Change…

Economic Commentary

The more they stay the same.  New Administration. New Congress. But the deadline for a funding bill to keep the government open goes down to the last second. And for the first time in five years, they did not kick the can down the road.  Instead, both sides walked away from the table. Apparently, they will need to shut the government down before they come up with another non-permanent solution.  The markets are getting so used to this routine that they barely react to the drama anymore. The last time they shut down for a significant period of time (five years ago), they did so for over a month.  While the stock and bond markets are barely reacting, if the shutdown drags on, what would the effect be on the real estate market? 

In our opinion, the timing of this shutdown is very inopportune for the real estate market. It would never be ideal, but in this case the markets were finally gaining momentum with housing prices leveling off and mortgage rates coming down. The uncertainty caused by the shutdown would threaten to stall this momentum as consumer confidence falters. There is also the interruption of services provided by the government within the real estate process.  Federal flood insurance, rural housing and FHA lending are all programs which might be halted and/or affected in some ways.  

Certainly, many government services must remain in place within a shut-down. We have to have a military to be able to protect the country.  Social security checks must be issued.  If not, there would be financial and social chaos. The Federal Reserve also would continue to implement fiscal policy.  Which brings up the question–how might the shutdown affect the Fed’s rate decision at the end of the month? There will be less data to rely upon if the shutdown continues. No employment or inflation reports.  But the fact that the economy could be affected negatively might spur the Fed to lower rates in any case. For now, all we can do is speculate and hope the shut down does not last that long.

Weekly Interest Rate Overview

The Markets. Mortgage rates eased slightly this past week as the markets contemplated the possible economic effects of the government shutdown. According to the Freddie Mac weekly survey, 30-year fixed rates fell to 6.30% last week from 6.34% the previous week. In addition, 15-year loans eased to 5.53%. A year ago, 30-year fixed rates averaged 6.32%, slightly higher than today. Attributed to Freddie Mac: “Mortgage rates decreased this week. Over the last few weeks, mortgage rates have settled in at their lowest level in about a year. There is growing evidence that homebuyers are digesting these lower rates and gradually are willing to move forward with buying a home, which is boosting purchase activity.”   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

Redfin released a report exploring how housing costs could return to “normal” by 2030 if home-price growth stabilizes and mortgage rates fall to 5.5%. “The path back to normal housing costs doesn’t require a crash in home prices–stability may be enough,” said Redfin Senior Economist Asad Khan “Buyers shouldn’t expect affordability to snap back overnight, but the trend lines point to real progress within this decade. If mortgage rates decline modestly, and price and income growth hold steady, the market for homebuyers could feel much different by the late 2020s. We are cautiously optimistic normalcy may not be as far off as many might fear.” Looking back to July 2018, mortgage rates were in the mid-4% range, home prices were rising at a stable pace, the ratio of buyers to sellers was relatively balanced and the national median mortgage payment-to-income ratio was at 30%. To be clear, Redfin noted, “normal” doesn’t automatically mean “affordable,” particularly given the variance between different areas. Instead, the authors measured how far each market would need to move to return to its own 2018 affordability level. With those constraints in mind, Redfin looked at a hypothetical scenario where mortgage rates fall to 5.5% and annual household income growth stays at 3.9%. If home prices grow at current rates (1.4%) year-over-year, Redfin posits U.S. housing costs would return to normal by November 2030. If they were flat, housing costs would normalize by January 2029; if they fell 2% year-over-year, housing costs would normalize by November 2027; and if they grew 2% year-over-year, housing costs would return to normal by July 2032. The report cautioned, however, that the hypotheticals do vary widely by different metro areas. But 16 of the 50 most-populous U.S. metro areas will return to their normal housing costs within five years if prices and household incomes continue to grow at their current pace and mortgage rates fall to 5.5%.  Source: Redfin

While many Americans have dropped out of the housing market in recent months, with sales falling year-over-year in six out of the past eight months, the number of foreign buyers snatching homes in the U.S. has risen despite growing economic concerns and historically high mortgage rates. Sales of existing homes to foreigners hit $56 billion in the year through March 2025, according to the National Association of Realtors (NAR), up by a third compared to a year earlier. Meanwhile, this spring the U.S. housing market reported its worst-selling season in over a decade among domestic buyers. The two things, experts say, may be connected, as foreign investors take advantage of the vacuum left by struggling American homebuyers.  Demand from U.S. homebuyers has dropped in recent months. Less demand from Americans, which is slowly putting downward pressure on home prices, has made it easier for foreign buyers to swoop in, especially as the value of the U.S. dollar against other currencies dropped by 11 percent in the first half of the year, according to Morgan Stanley. In fact, according to the NAR report on international buyers, foreign buyers were more likely to pay all cash (47 percent of their purchases in the year up to March were all cash, compared to 28 percent overall) and to buy more expensive properties.  “For U.S. residents, we’re in a period where mortgage rates are high, and the cost of homes as a percent of income is very high—this is driving demand down, but the same factors don’t hold back non-U.S. buyers who want to deal in all cash,” Mike Chambers, CEO of real estate tech startup Ridley, told Newsweek.  “Added to that, the weakening of the dollar means that homes are actually cheaper for some non-U.S. buyers, making investment more attractive. U.S. real estate has traditionally been viewed as a safe investment, especially in these markets, and rather than impacting potential buyers negatively the administration’s economic policies actually made investment more attractive due to the impact on the dollar.”  Source: Newsweek

The face of U.S. rentership is getting older. Between 2013 and 2023, the number of renters aged 65+ grew by 2.4 million, representing a nearly 30% jump and the largest increase of any age group. Today, more than 10.4 million older adults rent their homes, making up 13.4% of the renter population.  This shift reflects both the nation’s aging population and changing housing priorities. Seniors today are more willing to embrace renting as an alternative to homeownership, often citing downsizing, cost predictability, and proximity to family or healthcare as motivators.  According to housing analysts at Point2Homes, renting enables senior adults to bypass the burdens of upkeep and property taxes, while offering them greater flexibility at a season in life when their personal needs can shift in a moment without warning.  While natural aging accounts for part of the increase, financial factors loom large. Seniors are especially sensitive to high mortgage rates and housing costs, according to recent surveys, making renting a practical choice. Many are also staying in the workforce longer (nearly 1 in 5 adults age 65 or older is still working), adding to the appeal of flexible housing.  Source: Mortgage Point