9/2/25 REcap: Not so bad inflation and Trump’s New Fed Fight

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New Home Sales Plummet

For the fourth month in a row, newly built homes are selling for less than existing ones—a historic flip in the market. July’s median new-home price fell to $403,800, nearly $20,000 below resales, as builders slashed prices and sweetened deals with incentives. It's not a new story, Lennar, the nation's second-largest homebuilder, has been slashing prices for months with the hopes of drumming up demand. Even with two-thirds of builders offering perks, sales slipped to a 652,000 annual pace, down 8.2% from last year.

The problem isn’t supply—it’s demand. Buyers have more leverage in the resale market, where listings are up and sellers are finally negotiating. Resales are also typically located in better communities that are closer to work and school, meaning no long commutes. That dynamic has left builders in a rare spot: cutting faster and deeper than homeowners, yet still struggling to move inventory. Whether this inversion lasts will depend on how much further mortgage rates fall and if buyers see enough value to choose new over used. 

Inflation Heats Up (As Expected)

July’s inflation numbers came in right around expectations, but they told a nuanced story. CPI rose 2.7% year-over-year, with core prices up 3.1%—their fastest pace since February. The Fed’s preferred gauge, PCE, came in at 2.6% headline and 2.9% core, suggesting that tariffs are nudging certain categories higher but not triggering a broad-based surge. Inflation isn’t cooling, but it also isn’t hot enough to justify crushing the labor market further.

That’s the balancing act Fed officials are wrestling with. San Francisco Fed President Mary Daly said after the PCE release that “it will soon be time to recalibrate policy to better match our economy,” calling tariff-driven price increases “a one-off.” She admitted it will take time to know for certain, but warned the Fed “can’t wait for perfect certainty without risking harm to the labor market.” It’s a clear signal that protecting jobs may now take precedence over squeezing out the last of inflation.

Trump sets his sights on another Fed seat

As if the Fed didn't have enough to deal with. On Friday, the Justice Department issued a second criminal referral against Dallas Fed President Lorie Logan Cook, claiming that Cook committed mortgage fraud in connection with three separate mortgage loans.Cook called it a “clerical error,” but that doesn’t really make sense—there’s a world of difference between taking out a loan for a primary residence and for a second home. The former requires an affidavit swearing you’ll actually live in the property, a line that’s never taken lightly in mortgage lending.

For Trump, this is about adding more people to the Fed who will vote in favor of rate cuts. He’s shown he’ll do whatever it takes to put another one of his own appointees inside the Fed, reshaping the board to slash rates as far as he wants.  The issue went before a judge on Friday to see if Trump could remove Cook, but we have yet to hear the outcome.

Rate Cut Predictions 

Nothing is a foregone conclusion until we see this week's labor market data, but we're as close to seeing rate cuts as possible. Analysts currently say there's a 89.6% chance of a cut on September 17th .