September 16, 2025 – And The Three Questions Are?

Economic Commentary

The Federal Reserve Board’s Open Market Committee is meeting this week. Their meeting takes place one week after the most recent inflation report was released showing that consumer prices continue to rise higher than the Fed’s targets, as expected. This report only served to increase speculation regarding what the Fed might do. This leads to the first most obvious question – will the Fed lower their benchmark interest rate?  It has been about two months from the last Fed meeting and there have been so many events preceding this decision that we have lost count – including sobering employment news, Chairman Powell’s Jackson Hole speech and the continued pressure from the Administration which included the “contested” firing of a Fed board member.  At this juncture, the markets seem to expect a rate decrease from the Fed.

The second question leads from the first. If the Fed lowers interest rates, will they lower their benchmark interest rate by 0.25% or 0.50%?  With so much speculation, a 0.25% rate cut would not be seen as a surprise by any means, therefore the reaction of the markets could be fairly subdued.  On the other hand, a 0.50% reduction would truly be a surprise, and the markets’ reaction could potentially be quite robust. Mind you we are not predicting a 0.50% move, just pointing out that there is a possibility and it would lead to the further possibility for fireworks.  

The final question would be germane with either rate decrease but would be more interesting with the larger cut.  The question is – if the Fed lowers interest rates, how will long-term interest rates such as mortgage rates react? During these times, we always remind our readers that the Fed’s benchmark interest rate is a very short-term rate. Long-term rates don’t always react in tandem with the Fed’s actions. Why? Many times, long-term rates react in anticipation of the Fed’s actions. For example, mortgage rates have already fallen more than 0.25% during the previous weeks. Secondly, if the Fed lowers rates while inflation is rising, the move could have an adverse effect on long-term rates. This is why the inflation reports released last week were so important to note before the Fed met. It is also why the Fed statement accompanying any action could additionally affect market reaction. This could be a very interesting week.

Weekly Interest Rate Overview

The Markets. Mortgage rates continued to fall in response to weak economic news and speculation that the Fed will lower rates soon.  According to the Freddie Mac weekly survey, 30-year fixed rates fell to 6.35% last week from 6.50% the previous week. In addition, 15-year loans decreased to 5.50%. A year ago, 30-year fixed rates averaged 6.20%, 0.15% lower than today. Attributed to Freddie Mac: “The 30-year fixed-rate mortgage fell 15 basis points from last week, the largest weekly drop in the past year. Mortgage rates are headed in the right direction and homebuyers have noticed, as purchase applications reached the highest year-over-year growth rate in more than four years.”  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

After mortgage rates shot up three years ago, the housing market slowed. And the newest numbers from the National Association of Realtors (NAR) show only a glint of improvement: Sales of existing homes rose 2% in July, compared to a month earlier. At the current pace, the association estimates that about 4 million existing homes will be sold in the U.S. this year. That’s far lower than during the pandemic and significantly lower than before the pandemic. But there is a bright spot or two in the new figures. First, a lot more homes are for sale. “We now have the highest inventory since the 2020 lockdown period, essentially five years ago,” said Lawrence Yun, the association’s chief economist.  In July there were 1.55 million units for sale, nearly 16% more than a year earlier. The increase in inventory is good news for buyers, because it gives them options and more leverage to negotiate. Also, prices are softening in many markets: A report by Realtor.com found that prices in July dropped in 33 of the 50 largest metro areas. Even a small shift in mortgage rates seems to be enough to help loosen things up slightly. Mortgage rates have inched down in recent weeks and are now at their lowest level since October 2024.  That has spurred a jump in refinance activity, especially among homeowners with mortgage rates above 7%. It’s offered them a window to get a lower rate and shave potentially hundreds of dollars off their monthly payments.  The rising inventory level reported by the NAR is a sign that some people are moving out and giving up those low rates. “We are still below pre-COVID [levels], but certainly we are no longer in that low mortgage rate lock-in period. As people need to move, people are putting their homes on the market and making the next moves,” says Yun. “The turnover in the home sales market still remains very sluggish, but the inventory is beginning to show up.”    Source: NPR Business

Potential buyers judge your home before they step through the front door, and it all starts with the lawn they see on real estate sites and when they pull up to the curb. They aren’t just seeing green. Studies show that a well-maintained lawn can help put buyers at ease, signaling care and value, which can translate directly into dollars. How much green are we talking about? $20,000 to $25,000 in many cases, LawnStarter reports.  “A well-maintained lawn signals upkeep and care, which is often associated with the overall condition of the home and how much interest it might receive,” says Amber Kuefner, a realtor at Florida Home Sales & Development.  Poor landscaping can reduce property values by 10% to 30%, according to the National Association of Realtors (NAR) and Trees.com. That’s tens of thousands of dollars just from neglected lawns, dying plants, or poor curb appeal.  Across the U.S., buyers look for the same telltale signs of a well-maintained lawn. Curb appeal starts with the grass, and unkempt lawns send the wrong message before buyers ever step inside.  Source: 104.5 WOKV

Homeowners insurance premiums have increased 10% since last year, after similar increases in 2023, according to the National Association of Realtors. And the increase is even higher in storm and wildfire-ravaged states, but there are several ways you can lower your rates. Holden Lewis with NerdWallet explains that extreme weather is one of the main reasons for home insurance increases across the country. “We’re seeing more frequent disasters, and when they hit, they’re hitting more areas,” Lewis said. The other significant factor driving up rates is inflation. “When it costs more to repair a house, it’s going to cost more to insure that house,” Lewis said. To help keep costs down, Lewis recommends several strategies: Shop around for different insurance carriers; bundle your home and auto insurance policies, which often gives you a better rate; be aware that your credit score could affect your premium; and weatherproof your home, which can give you a discount.  “Especially in hurricane country, keeping your roof relatively new, having storm-resistant windows and shutters,” Lewis said.  Source: KSBY