6/23/25 REcap: Fed Now Says Expect 2 Rate Cuts Not 3, in 2025

Last week was a bit disappointing for homebuyers after the big CPI win the week prior. The Federal Reserve didn't cut interest rates, though no one expected them to, but their new projections and Powell's press conference spooked bond markets a little. Plus, with tensions building in the Middle East after the events that took place over the weekend, the uncertainty could push rates marginally higher until it's resolved.

The average rate on a 30-year fixed rate conventional loan fell to 6.797%  - from 6.781% the week before. 

ARMs are still a great option in this interest rate environment. Our Conventional ARM product is pricing 0.625% lower than a fixed rate loan! Make sure you're signed up for our weekly Friday rate alerts to see our sharpest pricing. One borrower said in his Google Review that he got a "whole point lower than chase!" after finding us through our rate alerts.

A lot happened last week so buckle in!

The Fed Met and They Still See Too Much Uncertainty

Last week, the Federal Reserve again highlighted the elevated uncertainty in the economic outlook, driven largely by trade policies and the unpredictable impact of tariffs.

Remember last week's edition of the REcap when I noted that the market was thrilled that tariff price increases hadn't shown up in the inflation data? Powell pooh-poohed that saying “We hadn't expected them to show up much by now, and they haven't, and we will see the extent to which they do over coming months.” AKA The Fed doesn't care about CPI data right now.

However, the real gut punch came when the analysts reviewed the Fed's updated projections for 2025. The Fed provides economic projections every other meeting, so it's the first time we've gotten the Fed's take since March. 

Powell noted that the Federal Reserve updated their most recent rate cut projections to show just 2 cuts in 2025 instead of the 3 cuts previously projected. Why? 

Retail Sales Sink

Consumer spending sunk like a stone in May, as retail sales fell 0.9% for the second straight month (worse than the 0.6% drop expected). Auto sales, which plunged 3.5% following a March rush before tariffs kicked in, was the main factor.

Excluding autos and gasoline, sales edged down only 0.1%, and restaurant receipts fell nearly 1%, marking the sharpest decline in over two years—signaling growing consumer caution amid trade uncertainty.

Of course, everyone sees the silver lining when data is negative and many pointed to solid wage growth as a factor to not be concerned much with the retail sales this month. We'll see how the situation develops. 

Lennar Home on Deep Discount as Housing Starts Fall to 5-Year Low

In May, U.S. housing starts dropped sharply, falling to a 1.256 million annualized pace—the lowest level in over five years, down 9.8% from April and 4.6% year-over-year.  The decline was driven entirely by a 30% plunge in multifamily starts, while single-family starts saw a modest 0.4% increase to 0.924 million 

The stability in single family housing starts doesn't meant that single family homebuilders are doing exceptionally well  by any means. Lennar, America’s second-largest homebuilder, reported a sharp 8.7% year-over-year drop in average home sale prices—down to about $389,000—the lowest level in five years, although affordability remains a struggle amid persistent high costs. 

Rate Cut Predictions

With everything said and done last week, September 17th is still the firm target date (unfortunately) even after the most recent inflation data. 

Make sure to follow us on Instagram for immediate reactions to all  news.  The recent events in the Middle East may have a volatile effect on the mortgage rates this week. The Fed's favorite inflation reading comes out on Friday so 🤞🤞.