September 30, 2025 – This is Getting Serious

Economic Commentary

We started the year off with a strong, but slowing economy. In 2024 the Gross Domestic Product showed a growth rate of approximately 2.5%, which was a decent showing. Though with higher interest rates and the pandemic recovery behind us, it makes sense that the economy would slow a bit from here.  What we were not expecting was a negative growth rate for the first quarter, but together with a 3.8% growth rate for the second quarter, the combined growth rate for the first half of the year was slower—but still positive at approximately 1.65%.

Granted, the implementation of tariffs most likely skewed the numbers in ways we probably will never understand, as companies rushed to beef up inventory to beat tariff implementation and others may have been reticent to make major moves in light of tariff uncertainty.  Regardless of these details, what we were not prepared for was the steep drop in employment creation. Again, there were various factors that influenced the results such as layoffs within the government sector. But there were also unexpected contributions by negative adjustments in previously announced results.  What were these adjustments?

Nearly one million fewer jobs were added in the 12 months ending March 2025.  And the April and May 2025 figures were adjusted downward by just over a quarter of a million jobs.  For years, the economy has continued to grow because the economy was adding enough jobs to keep consumers spending – save a short period of time during the pandemic. Thus far this year the economy is on track to add less than one million jobs, though we still have five months of numbers to bring the averages up. This is why the employment report to be released this Friday is so important. We are interested not only in September’s numbers, but the revision of the previous two months. The good news is that interest rates are finally reacting to the news by coming off their highs of the past few years. Lower rates can prompt consumers to increase their spending so we can create more jobs.

Weekly Interest Rate Overview

The Markets. Mortgage rates rose for the first time in several weeks as rates had already fallen before the Fed move to lower their benchmark rate. Plus, the economic news has been stronger in the past week leading to weakness in the bond markets. According to the Freddie Mac weekly survey, 30-year fixed rates rose to 6.30% last week from 6.26% the previous week. In addition, 15-year loans increased to 5.49%. A year ago, 30-year fixed rates averaged 6.08%, 0.22% lower than today. Attributed to Freddie Mac: “Following several weeks of decline, mortgage rates inched up this week. Housing market activity continues to hold up with purchase and refinance applications increasing by 18% and 42%, respectively, compared to the same time last year.”    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

Mortgage rates have fallen rapidly in recent months, offering homebuyers an opportunity for some borrowing relief if they move ahead with the big-ticket purchase. The average interest rate on a 30-year fixed mortgage moved down to 6.35% in mid-September Freddie Mac data showed. As recently as January, the average 30-year fixed mortgage rate exceeded 7%. The sharp drop in mortgage rates owes in part to government data showing a significant decline in hiring, which has heightened expectations that the Federal Reserve will slash interest rates and in turn put downward pressure on borrowing costs, some analysts told ABC News.  Each percentage point decrease in a mortgage rate can save thousands in costs each year, depending on the price of the house. “This is a significant drop,” Ken Johnson, a real estate economist at the University of Mississippi, told ABC News.  Meanwhile, the typical price of a home has fallen in recent months. The median sales price of a home in the U.S. registered at $410,800 over three months ending in June, which marked a decline from a price of $423,100 over the previous three-month period, according to U.S. Census Bureau data.  “Prices have cooled, inventory is up, time on the market is up,” Julia Fonseca, a professor at the Gies College of Business at the University of Illinois at Urbana-Champaign said. “All of this suggests it’s a more favorable market for buyers relative to recent years. I would be guided by your needs and your personal financial situation, rather than try to make predictions about future prices and future interest rates.”  Source: ABC News

Ace Hardware Home Services released a survey finding that 87% of millennial homeowners have at least one pending repair project, but 84% say they’ve delayed fixes. In terms of the types of projects that need to be done on the homes, the top category is electrical issues, at 66%. Those are followed by repairs on heating and cooling systems, at 62%, and plumbing, at 60%. Sixty-three percent of homeowners report relying on professionals for home repairs, as opposed to pursuing DIY projects. Exactly three-quarters say they would be comfortable painting walls themselves, and 36% say they would be alright with putting up drywall. More than half of respondents, at 53%, prioritize peace of mind with professional repairs over any satisfaction from successfully completing a DIY project. But 46% are proud to share their DIY repairs and organization wins online. On the flipside, 30% of homeowners say they have abandoned ongoing home improvement projects. The unresolved maintenance issues are having a significant impact on the homeowners’ lives–57% of homeowners surveyed report avoiding using parts of their home for extended periods of time due to unresolved maintenance issues. And ongoing stress and incomplete work affect daily life for 51% of millennial homeowner respondents.  Source: The Mortgage Bankers Association

New figures from NAHB highlight the enduring role of small businesses in the residential construction industry. According to the latest NAHB member census, most builder members continue to operate on a modest scale amid a housing industry facing affordability challenges, labor shortages, and material cost volatility. The census shows the median number of housing starts by builder members in 2024 was six — a number that has remained constant since 2021. These builder members include single-family and multifamily home builders, commercial and residential remodelers, commercial builders, land developers, and modular or panelized home manufacturers. Revenue data also underscore the small-business nature of most NAHB builders. The median builder brought in $3.7 million in 2024, an 8% increase over 2023. Despite the growth, 60% of builder members reported earning under $5 million for the year. The largest segment (35%) reported revenue between $1 million and $4.9 million. Only 16% exceeded $15 million in total revenue. The U.S. Small Business Administration currently defines residential builders and remodelers as small businesses if they generate under $45 million in average annual receipts, or $34 million for land developers. By that measure, nearly all NAHB builder members meet the threshold.  Employee data further reflect the lean operating structure of many builders. The median number of employees among builder members in 2024 was six, unchanged from the previous year. NAHB officials note that many builders rely heavily on subcontractors, which allows them to remain flexible while keeping direct payroll costs low. Source: The National Association of Home Builders