Inflation showed a modest increase in July, with the Federal Reserve’s preferred measure – the core Personal Consumption Expenditures (PCE) Index – rising 2.9% year-over-year, according to the U.S. Department of Commerce This Week in Real Estate. This marks the third consecutive monthly increase in core PCE. Despite the upward trend in core inflation, financial markets continue to anticipate a rate cut at the upcoming Federal Open Market Committee (FOMC) meeting on September 17, citing weakness in the labor market as a key factor. All eyes will be on the August jobs report scheduled for later this week. Should employment data come in weak again, it is expected the Fed will move to lower the federal funds rate in support of job creation and broader economic stimulus. Mortgage rates continued their downward trajectory for the fifth time in six weeks, reaching a 10-month low. The average rate for a 30-year fixed mortgage fell to 6.56%, down from 6.58% the previous week. Freddie Mac reported that the average mortgage rate in August was 6.59%, a 13-basis point decrease from July. The 10-year Treasury yield, a key benchmark for mortgage pricing, also declined by 8-basis points over the same period. Pending home sales dipped slightly in July, with contract signings for existing homes down 0.4% from June, though activity was 0.7% higher than in July 2024, according to the National Association of Realtors. New home sales also softened, falling 0.6% month-over-month and 8.2% year-over-year, based on data from the U.S. Census Bureau and the Department of Housing and Urban Development. To counteract slowing demand, homebuilders are increasingly leveraging buyer incentives. According to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), 66% of builders offered discounts or other incentives in August – the highest level in five years. Below are key events from the last week of August impacting our business:
MORTGAGE RATES MOVE LOWER, HITTING 10-MONTH LOW. Average mortgage rates in August continued their steady decline and are now at their lowest rate since last November. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.59%, 13 basis points (bps) lower than July. Compared to a year ago, the 30-year rate is higher by 9 basis points (bps), and the 15-year rate is marginally higher by 3 bps. The 10-year Treasury yield, a key benchmark for long-term borrowing, averaged 4.29% in August – an 8 bps decrease from the previous month. Yields moved unevenly during the month: initially declining, then rising following July’s inflation report that noted an acceleration in core inflation. Long-term yields subsequently retreated following Federal Reserve Chair Jerome Powell’s Jackson Hole speech last Friday, where he signaled possible rate cuts. Powell noted that the downside risk to employment is on the rise while inflation expectations are well-anchored around the Fed’s longer-run target of 2%. Read the full story here.
PENDING HOME SALES SHOW 0.4% DECREASE IN JULY. Pending home sales decreased by 0.4% in July from the prior month and rose 0.7% year-over-year, according to the National Association of REALTORS® Pending Home Sales report. Pending sales declined month-over-month in the Northeast and Midwest, held essentially flat in the South, and rose in the West. Year-over-year, sales decreased in the Northeast and West but increased in the Midwest and South. “Rising mortgage applications for home purchase are an early indicator of more serious buyers in the marketplace, though many have not yet committed to a pending contract. The Federal Reserve signaling that they may enact a lower interest rate policy should steadily enlarge the pool of eligible home buyers in the upcoming months,” said NAR Chief Economist Lawrence Yun. Read the full story here.
NEW HOME SALES FLAT AS AFFORDABILITY CONCERNS PERSIST. Sales of newly built single-family homes edged 0.6% lower in July, falling to a seasonally adjusted annual rate of 652,000 from an upwardly revised reading in June, according to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales is down 8.2% from a year earlier. New single-family home inventory held steady at 499,000 residences marketed for sale as of July. This is 0.6% lower than the previous month, and 7.3% higher than a year ago. At the current sales pace, the month’s supply for new homes remained elevated at 9.2 compared to 7.9 a year ago. On a year-to-date basis, new home sales are 4.0% lower thus far in 2025. As estimated by NAHB, total months’ supply, defined as a combination of current new and resale single-family inventory, now stands at 5.2. This is the highest sales-adjusted inventory level since 2015 and will place downward pressure on housing construction starts in the months ahead.. Read the full story here.
CORE INFLATION ROSE 2.9% IN JULY, HIGHEST SINCE FEBRUARY. The personal consumption expenditures price index (PCE) showed that core inflation, which excludes food and energy costs, ran at a 2.9% seasonally adjusted annual rate, according to a Commerce Department report Friday. That was up 0.1 percentage point from the June level and the highest annual rate since February, though in line with the Dow Jones consensus forecast. On a monthly basis, the core PCE index increased 0.3%, also in line with expectations. The all-items index showed the annual rate at 2.6% and the monthly gain at 0.2%, also hitting the consensus outlook. The Fed uses the PCE price index as its primary forecasting tool. Though it watches both numbers, policymakers consider core inflation to be a better indicator of longer-term trends as it excludes the volatile gas and groceries figures. “The Fed opened the door to rate cuts, but the size of that opening is going to depend on whether labor-market weakness continues to look like a bigger risk than rising inflation,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management. “Today’s in-line PCE Price Index will keep the focus on the jobs market. For now, the odds still favor a September cut.”. Read the full story here.
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