September 29, 2026 – Addressing Rising Rates

Economic Commentary

Last week we addressed the issue of inflation and inflation’s influence on interest rates. The Federal Reserve’s policy is to keep inflation at a 2.0% level as elevated inflation has a detrimental effect upon the economy.  Certainly, elevated inflation has a detrimental effect upon every American’s pocketbook. The Fed tries to ease inflation by tightening monetary policy which can mean that they are raising their benchmark interest rate (the Federal Funds Rate) and/or decreasing the supply of money in circulation. These actions are designed to slow the economy at the same time.

Of course, the decision to tighten monetary policy is problematic if the economy is not strong. This is where the Fed’s balancing act comes in because the Fed’s goal is also a healthy economy.  In other words, we don’t want to give the patient too much medicine, which would cause additional or even worse problems.  To add another factor into the equation, there is the possibility that the Fed could raise interest rates as they did a few weeks ago but long-term rates such as rates on mortgages could go down as a result. How is that possible? First, the Fed controls very short-term rates. However, it is also not unusual for rates to rise in anticipation of the Fed’s action, which is exactly what is happening. Federal Funds Rate is the rate that banks charge each other to borrow funds overnight to make sure their balance sheets are “balanced.” That is very short-term.

Long-term rates are affected more by the prospects of inflation, as discussed previously. When the Fed raises their benchmark interest rate, the markets could perceive that the Fed is acting to bring inflation under control, which is a good thing. Therefore, it would not be unusual for the markets to react positively to this Fed action. It is also not unusual for rates to rise in anticipation of the Fed’s action, then easing back somewhat after it happens. Going back to the economy, on Friday we have a report being issued which will give us a good idea if the Fed feels like the economy is strong enough to withstand higher short-term rates. That report is the monthly employment report for September. Last month we had a strong jobs report. Two strong reports in a row could denote the start of a trend after a long period of slow job growth. We expect the markets to watch this report closely in this regard.

Weekly Interest Rate Overview

The Markets. Mortgage rates continued to rise sharply in the past week following government bond rates which were moving higher. They continued to rise after the Freddie Mac survey was released. According to the Freddie Mac weekly survey, 30-year fixed rates rose to 7.03% last week from 6.95% the previous week. In addition, 15-year rates increased to 6.42%. A year ago, 30-year fixed rates averaged 6.30%, 0.73% lower than today. Attributed to Freddie Mac: The housing market remains supported by a solid labor market and an economy that is growing at a healthy rate. 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

Zillow’s August data show the result: Home sales fell 0.6% from a year earlier, while newly pending listings, a more current sign of buyer activity, fell 2.6%. The pullback follows a brief period of improving conditions earlier this year, when lower rates helped revive activity. Earlier this year, rising mortgage rates began to erode affordability gains even as the housing market showed signs of renewed momentum. That seems like bad news, but for some, it might be an opening. Buyers who can make a move today are encountering conditions that were scarce during the frenzied years: more homes to consider, more time to decide and sellers who are increasingly cutting prices to attract buyers. There were 1.41 million homes for sale nationwide in August, 3% more than a year earlier, and 26.3% of listings carried a price cut. “Affordability is putting the brakes on the for-sale market, but it is also changing the experience for buyers who remain active,” said Mischa Fisher, Zillow chief economist. “Less competition gives well-prepared buyers a better chance to compare options and negotiate with confidence.”  For sellers who are battling for the buyers who can make this market work, everything comes down to preparation. Pricing competitively from the start matters when buyers are taking more time.  Source: Zillow

Clever Real Estate released a report finding that 50% of Americans report living paycheck to paycheck. Seventy-four percent believe they will still be living that way a year from now. However, homeowners report being slightly more satisfied. Two-thirds (68%) of homeowners say they are satisfied with their finances while only 47% of non-homeowners say the same. More than one quarter–27%–of respondents describe themselves as over-spenders, but only 49% of those who describe themselves that way own a home, compared with 62% who don’t overspend. Thirty-nine percent of non-homeowners point to housing costs as impacting their money troubles, compared with 22% of homeowners. They’re also twice as likely to lack an emergency fund, at 61% for non-homeowners compared with 30% of homeowners. Forty-four percent of respondents report having missed a bill because of overspending on nonessentials. Half report having had to delay major life milestones–10% report having put off buying a home, and 19% said they have delayed saving for retirement. The vast majority (88%) of Americans admit to making impulse purchases, with 59% admitting they have knowingly made a purchase they couldn’t afford. And the majority, 68% (and 97% of self-reported over-spenders) have regrets about their spending habits. Source: Clever Real Estate

About one in four Americans is already using self-storage and just as many are actively searching for a unit online currently. Across the 150 largest U.S. cities, self-storage searches rose 23% year-over-year in 2025 — nearly triple the growth recorded the previous year, up from around 8% in 2024. Extra space has evolved from a convenience into an increasingly important part of household planning for a growing share of the population. What’s driving the shift? A housing market that remains challenging, homes that are becoming more compact, and lifestyles that require greater flexibility. Current housing conditions have made moving more difficult for many Americans giving homeowners with lower existing rates a strong incentive to stay put — even when their space no longer fully suits their needs. Buyers entering the market face a different challenge: New construction is delivering less square footage at higher prices, a trend some analysts have called housing shrinkflation.  Gen Z is navigating these pressures from another angle. Homeownership, long regarded as a generational milestone, can feel increasingly distant when saving for a down payment competes with rent, student debt, and everyday living expenses. Whether renting or preparing to buy, many young adults are building full lives in more compact spaces.  Remote and hybrid work have added another layer to the equation. For a growing number of Americans, a home office has become a practical requirement, meaning every corner devoted to work leaves less room for storage and other household needs.  Source: StorageCafe