In three of the last four months, ADP’s private employment figure has gone backwards. In other words, the economy is losing jobs on a net basis. That doesn’t sound like a ‘solid’ job market to me.

The Fed cuts rates and mortgage rates go up? That’s counterintuitive, isn’t it? Well, yes, it would be, if it were true. But it isn’t. Markets anticipate change, and the bond markets had already priced in multiple Fed rate cuts well in advance of the actual Fed meeting.

The first rate cut of 2025 was both well-telegraphed by the Fed, and anticipated by the markets. Average mortgage rates are at their lowest levels in a year, and are only 20–25 basis points (0.20%-0.25%) from being at their lowest levels in 3 years! Summer may be over, but these lower mortgage rates are definitely going to heat up transaction activity — if they can last.

An already lackluster “jobs week” ended with a bang: the BLS jobs report showed that the US economy added just 22K jobs in August — well below expectations. That convinced the market that at least 2, and possibly 3, Fed rate cuts will happen before year-end.

So far, there has been nothing from “jobs week” to derail a Fed rate cut on September 17. In fact, the jobs data has generally come in weaker than expected. At the same time, a growing number of Fed members are voicing concerns about the upside risks to the unemployment rate.

The last week has been momentous, with Jerome Powell signaling rate cuts ahead, average 30-yr mortgage rates falling to near 6.50%, and national home prices declining for the fourth-straight month (on a seasonally-adjusted basis).

Mortgage rates drifted higher on growing concerns that the Fed might NOT cut rates on September 17. Meanwhile, home price growth continues to moderate nationwide and transaction volumes remain stuck at roughly 4 million existing home sales per annum.

Mortgage rates are trending lower, a Fed rate cut is highly likely in September, home prices are falling (modestly) in many markets, and buyers are regaining negotiating power. It’s still tough out there for buyers, but affordability is certainly improving at the margin.

The shocking July BLS jobs report changed everything. The market is now fully expecting a rate cut in September, and average mortgage rates dropped to near 6.5%. Affordability is improving!

A very busy week with the FMOC meeting, jobs data (JOLTs, ADP), and inflation (PCE). Unfortunately, the numbers largely supported the Fed’s “wait and see” approach: private job growth rebounded and annual inflation rose.

Despite rising inventory levels, existing home sales remain stuck at a 4 million unit annual pace. Homes are lingering on the market longer, and buyers are regaining some of the negotiating power that they lost during the pandemic. Meanwhile, the market is certain that the Fed will stay on pause next week.

It’s been a rough two weeks for mortgage rates, with stronger than expected jobs growth, higher CPI (inflation) and rising bond yields globally. The silver lining for buyers is that home inventory levels continue to rise. That means more choices AND more negotiating power.