The week of Oct. 26 brought a strong economy and a cooling housing market. The Federal Reserve held rates but signaled no easing, mortgage rates edged lower after climbing above 7.3%, and the housing data kept pointing to a market losing momentum. Lenders also began to show the strain.
The Fed holds, and two officials want to go higher
On Oct. 28 the Federal Open Market Committee kept the federal funds rate at 3.75% to 4% by a 10β2 vote. The two dissenters, Lisa D. Cook and Beth M. Hammack, wanted another quarter-point increase. The statement described economic activity as “expanding at a strong pace” and said inflation “remains elevated.” It did not mention rate cuts. Our full account of the decision has the details.
The next day’s data supported the committee’s view. Real GDP grew at a 3.4% annual rate in the third quarter, up from 2.2% in the second, according to the government’s advance estimate as summarized by the National Association of Home Builders. Housing was the exception. NAHB’s analysis of the same report found that residential fixed investment, which covers homebuilding and remodeling, fell at a 3.3% annualized pace. It was the sixth decline in eight quarters, and housing’s share of the economy slipped to 15.7%. September’s PCE price index, the Fed’s preferred inflation gauge, rose to 3.6% from a year earlier, its fastest pace since May. The core measure rose 3.1%.
For agents and investors, the takeaway is that the economy is not giving the Fed a reason to lower rates, and policymakers are openly debating whether to raise them again.
Mortgage rates ease for a second week
Freddie Mac’s Primary Mortgage Market Survey put the 30-year fixed rate at 7.24% on Oct. 29, down from 7.32% a week earlier. Freddie Mac said that is the lowest level this month. A year ago the rate was 6.17%. The 15-year rate fell to 6.60%. The dip offers little relief. Rates are still more than a full percentage point above where they stood a year ago.
The data turn softer
Prices are flattening. The Case-Shiller index showed a 2.1% annual gain in August but a 0.2% monthly decline. Redfin’s latest figures showed home-sale prices slipping below year-ago levels for the first time in three years, with pending sales at a record low. New-home sales held at a 676,000 annual pace in September, while the average new-home price was 6.7% below a year earlier.
Builders are adjusting. D.R. Horton guided to fewer closings in fiscal 2027 after fourth-quarter orders fell 7%. On Oct. 28 the Census Bureau put the third-quarter homeownership rate at 65.5%, according to NAHB’s summary. That is a modest quarterly rise, while the rental vacancy rate edged up to 7.6%.
Credit is where the week changed most
The clearest shift from earlier weeks came from lenders’ third-quarter results. Fannie Mae more than doubled its credit provision as apartment loans weakened. Freddie Mac added to loss reserves on its rate outlook. Blackstone Mortgage Trust cut its dividend. On Oct. 30, Arbor Realty Trust suspended its dividend outright as its non-performing loans rose to $647.6 million. On our reading, the stress showing up so far is heaviest in multifamily and commercial lending, and it is the trend to watch as long as rates stay high.
Elsewhere, Zillow agreed to pay $212.5 million to settle an investor class action over its shuttered Zillow Offers home-flipping business. Invitation Homes added a $500 million buyback, which it is funding by selling rental houses.
Taken together, the week reinforced a market split in two: a fast-growing economy keeping rates high, and a housing sector absorbing the cost through lower prices, fewer sales and, increasingly, weaker loans. Next week brings the October jobs report, the Fed’s loan officer survey and Election Day. Our Sunday preview covers what is on the calendar.
