October 6, 2026 – Where Do We Go From Here?

Economic Commentary

Like most years, this year has been a very interesting one with many twists and turns from an economic standpoint. We started the year with a lot of optimism regarding interest rates and the real estate market.  In late February 30-year fixed mortgage rates hovered around 6.0%, and America had commenced refinancing their higher fixed rate mortgages.  About that time the conflict with Iran started. It was supposed to last a few weeks, and we would be back to normal.  Instead, the conflict escalated and metamorphosized into a battle over oil routes.  Despite the fact that the military side of the conflict has quieted down, the effect upon prices has persisted and even escalated over time.

This has led to the Federal Reserve raising short-term rates to combat elevated inflation. Not that inflation has escalated significantly considering the sharp rise in energy prices, however inflation is definitely not easing towards the Fed target of 2.0%.  The question the markets are pondering after the Fed made their move:  Is the Fed finished, or are there additional rate increases on the way?  Judging by the unanimous decision to raise rates and the statement issued by the Fed, many are speculating that we could have at least one more rate increase before the end of the year.

The Fed’s assessment of the strength of the economy will help guide this determination and this past Friday the government released the jobs report which gives us an important economic benchmark. In September, the economy added 29,000 jobs and the unemployment rate rose by 0.1% to 4.2%.  In addition, the previous two months of gains were revised downward by 60,000 jobs, resulting in a total loss of 31,000 jobs. On the inflation side, wage growth increased 0.1% month-over-month and 3.0% annually. Overall, this was seen as a weak report which came on the heels of a strong report the previous month. This gives the Fed less leeway to make additional moves this year.  Their next meeting will come at the end of October.

Weekly Interest Rate Overview

The Markets. Another week of mortgage rates rising sharply as they follow government bond rates higher due to stronger economic news. There was some easing after the PCE Inflation Index came in lower than expected. According to the Freddie Mac weekly survey, 30-year fixed rates rose to 7.28% last week from 7.03% the previous week. In addition, 15-year rates increased to 6.60%. A year ago, 30-year fixed rates averaged 6.34%, 0.94% lower than today. Attributed to Freddie Mac: With mortgage rates on their current trajectory, the housing market continues to be supported by favorable economic conditions.  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

House hunters are finding more choices today than they have in many years. Housing inventories climbed 3.2% from July to August and are up about 6% from a year ago, offering a meaningful boost to a market that has long been starved for listings. NAR’s data shows this is the first time since November 2019 that housing inventory nationally has exceeded 1.6 million units. “The number of months it would take to exhaust the total inventory at the current sales pace has grown to 4.9 months’ supply—it’s the highest level in over 10 years,” NAR Chief Economist Lawrence Yun says. “The ample supply of homes for sale on the market is giving home buyers better opportunities to negotiate.” The August REALTORS® Confidence Index indicates that the change may be translating into more negotiating power for buyers. Only 16% of homes sold above list price in August, down from 20% a year ago. In addition, more sellers are keeping their homes on the market—choosing not to delist at rates seen last year. The median days on the market in August was 31 days, NAR’s data shows. The perceived opportunity may be gradually drawing more first-time buyers back into the market: The Confidence Index shows their share of existing-home purchases rose to 30% in August, up from 28% a year ago.  Source: The NAR

Keeping the nation’s aging housing stock in sound condition demands growing investment. New analysis of the American Housing Survey (AHS) finds that while spending on improvements and repairs rises as homes age, the capacity to meet that need differs sharply by income. Among owners of homes built before 1960, those in the highest income quintile spent three times as much on improvements and repairs in 2023 as those in the lowest. Though the oldest homes need significant investment, they are disproportionately occupied by owners with the least financial capacity to make repairs. The housing stock is the oldest on record. In 2023, the housing stock reached a median age of 44 years, up from 39 years in 2013, and 28 years in 1993. A prolonged period of underbuilding during the Great Recession meant that far fewer new homes were added to the stock compared to previous decades. In 2023, one in four homeowners (22 million households) lived in a home built before 1960.  The age of a home shapes the composition of home improvement and repair spending. In 2023, home maintenance accounted for 22 percent of total remodeling and repair expenditure on homes built before 1960, compared to just 16 percent of spending on homes built in 2010 or later. Replacement projects such as roofing, siding, windows, insulation, and HVAC are difficult to defer as they are often essential to maintain safe and decent conditions. Taken together, replacements of exterior and interior home components, systems, and equipment accounted for 39 percent of homeowners’ spending on homes built before 1960, far above the 24 percent share for homes built in 2010 or later. Average improvement and repair spending increases considerably as homes age past 20 years and remains elevated as core components and systems cycle through their useful lives. In 2023, owners living in homes built before 1960 spent an average of $6,000 on improvements and maintenance, about 35 percent more than the $4,500 average for homes built in 2010 or later. This pattern holds across income levels, with homeowners at all income levels spending more on average on older homes than newer ones.  Source: The Joint Center For Housing Studies, Harvard University

There are signs that the traditional American mall may be in the early stages of recovery. The enclosed, climate-controlled shopping center has been on the commercial real estate obituary page for more than a decade, thanks to many reasons, including the rise of online shopping, the COVID-19 pandemic and changing retail trends. But recently there have been signs of improving fortunes for the venerable mall. In March, it was reported that Gen Z shoppers, those ages 14 to 29, purchased 62% of their merchandise in malls last year. That was 10% more than shoppers who are 25 or older. This group of shoppers is expected to be responsible for global sales in excess of $12 trillion by 2030.  The Wall Street Journal has reported that the younger generation’s newly found love for malls has resulted in increasing demand for mall space and rising mall values. Real estate analytics firm Green Street estimates that the value of malls has increased by 13% in the past year, topping other commercial property sectors. That growth has attracted more investors eager to find profits in the otherwise sluggish commercial real estate market.  Green Street estimates that seven malls have closed so far this year, which is down from nine closings for all of last year. The number of mall closures has been steadily decreasing since 19 closed their doors in 2021. It is estimated that about 200 malls have closed since the 2008 financial crisis, leaving about 900 still open in the U.S.  Source: Scotsman Guide