October 22, 2025 – A Non-Scheduled Pause…

Economic Commentary

The government shutdown has now run for three straight weeks. The shutdown has caused a host of disruptions across America – from shortages of personnel at certain airports causing flight delays to the expiration of Federal Flood Insurance needed to close mortgages for real estate transactions. Of course, no sector is suffering more than the government workers who are furloughed and thus not getting paid. That is precisely the most severe pain point inflicted by this horrendous mess.

Regarding the economic sector, it is increasingly hard to measure the effect of the shutdown upon the economy. We can surmise with relative certainty that the shutdown is causing a negative effect. But it is hard to determine how severe this effect is.  Why? Because the government has stopped issuing reports of most economic data. For example, we can be relatively certain that hiring is affected negatively, especially since the government has also begun laying off thousands of government workers. But we don’t know how badly the labor market is being hit because the government is not issuing employment reports.  We can project from alternative data sources, such as the ADP payroll report, but these reports don’t always align with government data.

Apparently, the Department of Commerce is going to issue a belated inflation report next week. That is timely, especially because the Federal Reserve’s Open Market Committee is scheduled to meet next week as well.  The Fed will be making a decision on interest rates amidst this dearth of data.  We have mentioned previously that the Fed’s balancing act between fighting inflation and a slowing economy was difficult. Now it is more herculean to say the least.  Certainly, the Fed can see that the trajectory of slower hiring of the past few months is likely to be exacerbated by the shutdown.  If this is the case, then another rate cut is more likely.  We will see…

Weekly Interest Rate Overview

The Markets. Mortgage rates eased slightly for the second straight week as the government shutdown continued. According to the Freddie Mac weekly survey, 30-year fixed rates fell to 6.27% last week from 6.30% the previous week. In addition, 15-year loans eased to 5.52%. A year ago, 30-year fixed rates averaged 6.44%, 0.17% higher than today. Attributed to Freddie Mac: “Mortgage rates inched down this week and have held relatively steady over the past several weeks. Importantly, homeowners have noticed these consistently lower rates, driving an uptick in refinance activity. Combined with increased housing inventory and slower house price growth, these rates also are creating a more favorable environment for those looking to buy a home.” 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

Nearly one-fifth of homes for sale in September earned a markdown in the latest sign that the national housing market continues to slide slowly in favor of buyers. Luxury listings saw the fewest reductions, according to a new Realtor.com analysis of listings data, while lower- and mid-tier homes continue to drive price cuts across many markets. Homes priced between $350,000 and $500,000 saw the greatest share of price cuts at 21.6%, while just 13.3% of listings priced above $1 million saw reductions.  “September’s trends show a housing market increasingly tilting in buyers’ favor, with a rising inventory of homes for sale, longer days on market and more competitive pricing,” said Danielle Hale, chief economist at Realtor.com.  Price cuts are part and parcel of a slowdown in home price appreciation unfolding across the U.S. in a deflationary response to severe purchase affordability constraints instigated by consecutive years of double-digit home price growth between 2020 and 2022. According to Federal Reserve Economic Data, the average sales price of $371,100 in the second quarter of 2020 rose roughly 14.5% to $428,600 in the second quarter of 2021. By the second quarter of 2022, the average sales price was up another 18.4% to $525,100. The average sales price nationwide fell back to $512,800 as of the second quarter of 2025.  Source: Scotsman Guide

Although shortages are not quite as widespread as they were in 2021, obtaining lots remains a challenge for many home builders, according to recent results from the NAHB/Wells Fargo Housing Market Index (HMI) survey.  In special questions on a recent HMI survey, 64% of single-family builders reported a shortage of lots, with 38% characterizing the supply as low and 26% indicating it was very low. This is down slightly from the 67% reported in both 2023 and 2024, and down significantly from the peak of 76% in 2021 (a year after the COVID-19 pandemic). Nevertheless, the shortage percentage is higher than it had been at any time between 1997 (when NAHB first began tracking the number) and 2016. The current lot shortage seems particularly severe relative to the level of new housing production. Before the historic 2009-2010 trough in housing starts, the share of builders reporting a low or very low supply of lots never exceeded 53% — even in 2005, when starts topped 2 million. However, by 2015, when starts had partially recovered, the share of builders reporting lot shortages unexpectedly climbed to more than 60%, and it has remained there stubbornly ever since.  Over the past three years, the annual starts rate has been consistently under 1.5 million (approximately the long-run average from 1970 through 2000), while the share of builders reporting a low availability of lots has never dipped below 64%. An inadequate supply of lots adds to the challenges to build homes, especially at the lower end of the price scale, and adversely impacts housing affordability.  Source: The National Association of Home Builders

Clever Offers found that 55% of recent sellers were surprised by the cost of selling their home and 48% had underestimated how much they’d need. The average cost to sell a home is $67,245, Clever reported. In contrast, sellers expected to pay an average of $18,557. Clever surveyed sellers from 2023 to present. Contributing to those costs include pre- and post-listing repairs, listing agents’ commission, buyer’s agents’ commission, closing costs, concessions to the buyer, moving costs and marketing and staging. Forty percent of respondents said they felt financially stressed during the home-selling process, 41% didn’t budget for their home sale and 22% took on debt to cover the cost of selling their home. Three-quarters said they would have made different choices if they knew the costs of selling a home. Most–79%–did make money on their home sale, but 51% say their profit was less than they expected because of the total cost to sell. As the housing market has been a bit friendlier to buyers recently, sellers are having to make some compromises, the study found. Seventy-nine percent of sellers report having compromised their priorities when selling their home, such as wanting to sell their home without repairs but having to make them anyways, or wanting to sell without concessions, but having to make them.  Source: Clever Real Estate