Real Estate Market Update: A Look at Rates, Jobs, and Inflation
(Courtesy of NEXA Mortgage)
Why do you have to know about rates and jobs in the real estate market?
Rates and jobs are highly relevant to the real estate market. Mortgage rates directly impact affordability for homebuyers, influencing demand and home prices. The job market is equally important because employment stability affects people's ability to buy homes and make mortgage payments.
Despite Volatility, Rates Remain Steady
Recent headlines might suggest heightened volatility in the market, but in reality, rates have remained surprisingly steady. The market continues to focus on hard economic data rather than speculation. While tariff-related headlines have surfaced, traders are waiting for concrete impacts before making significant moves.
The Job Market’s Influence on Rates
Among economic reports, the monthly jobs report (Employment Situation) holds the most weight. The latest report revealed slightly lower job creation than expected—typically good news for rates. However, this time, rates did not decline as anticipated. One major reason was the unemployment rate, which continued to drop despite an increase in labor force participation.
This is notable because, since July 2024, many were concerned about potential recession signals from the unemployment rate. Historically, when unemployment began rising as it did last year, it tended to continue upward. Instead, the latest data shows that the labor market has stabilized, helping to keep rates in check.
Mortgage Rates and Treasury Yields: A Calm Trend
Mortgage rates and Treasury yields generally move in the same direction. Despite some fluctuations in recent weeks, they have found resistance, stabilizing after a period of decline. This trend is largely due to favorable inflation data, which has allowed rates to settle rather than spike unpredictably.
The Expected Fed Funds Rate After March
Market expectations for the Fed Funds Rate often appear volatile when viewed in the short term. However, when zoomed out, the trend has been relatively stable. Economic data, particularly jobs reports, continue to shape expectations for rate cuts.
The Role of Inflation: CPI’s Next Move
While the jobs report is a crucial indicator, inflation—specifically the Consumer Price Index (CPI)—remains equally significant. CPI has shown progress toward the Federal Reserve’s 2% target, but concerns linger about whether this progress will stall. If inflation remains slightly above target, the Fed may hesitate to cut rates further.
It's important to note that while the Fed Funds Rate does not directly control mortgage rates, lower inflation typically leads to lower consumer borrowing costs. This makes CPI a key indicator for those watching mortgage rate trends.
The next CPI report will be released on Wednesday, February 12th, at 8:30 AM. Investors and market watchers will be paying close attention, as its outcome could impact the direction of rates in the coming months.
Final Thoughts
For real estate buyers, sellers, and investors, staying informed about the labor market, inflation, and the Fed’s next moves is crucial. While rates have remained steady despite external noise, upcoming economic reports will help shape expectations for the rest of the year. Keeping an eye on CPI and employment trends will provide a clearer picture of where the market is heading next.
