9/29/25 REcap: Powell's Silence Sends Mortgage Rates Higher

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Powell Stays Quiet on Future Cuts

Powell reminded markets in his speech last week that “two-sided risks mean there is no risk-free path”. He emphasized the Fed’s dilemma: inflation remains above target even as the labor market shows signs of softening. That message reinforces the idea that monetary policy decisions will continue to be data-driven, not automatic.

But what really caught investors’ attention was what Powell didn’t say. At Jackson Hole earlier this year, he openly floated the possibility of further rate cuts if conditions warranted and mortgage rates immediately fell as a result. This speech had no such signal. By staying silent on future cuts, Powell effectively told markets the Fed is cautious about doing too much too quickly. Investors interpreted that omission as a sign the Fed isn’t as serious about an easing cycle as many hoped.

The reaction was swift: yields ticked higher, and mortgage rates followed suit. For borrowers, that means optimism for a near-term drop in financing costs faded somewhat, at least for now. While a single meeting doesn’t rewrite the Fed’s playbook, it’s a reminder that markets are hypersensitive to Powell’s wording—and that rate-lock timing can make a meaningful difference in how much you pay over the life of a loan.

Jobless Claims Drop - Easing Labor Market Fears

The Fed’s first cut this year was largely justified by rising concerns over a weakening labor market. But last week’s jobless claims told a different story: filings fell to 218,000, far below the 235,000 estimate. That surprise strength suggests the labor market isn’t deteriorating as quickly as feared. For the Fed, better-than-expected labor data makes additional cuts less urgent—investors picked up on that, and mortgage rates edged higher as markets recalibrated expectations.

New Home Sales Soar

National existing-home sales were essentially flat in August, slipping 0.2% from July to an annualized pace of 4 million units. The median price of an existing home came in at $422,600, up 2% year-over-year, marking the 26th straight month of annual price gains. Supply continues to continues to be the main story. While falling lower month-over-month, it remains nearly 12% higher nationally than a year ago.

Newly built home sales told a very different story, soaring 20.5% in August to the highest level since early 2022. The median price was $413,500, meaning new homes are now selling for less than existing homes on average—a first in U.S. housing data. Part of the reason for the surge in sales is that builders leaned heavily on incentives to move inventory, from rate buydowns to covering closing costs. That helps explain why new home sales can spike even when mortgage rates still remain elevated: buyers are being enticed with deals that aren’t available in the resale market.

The national data is striking, but it masks wide regional variation. What’s happening in Austin can look nothing like Los Angeles or Westport, Connecticut. Inventory gluts, builder incentives, and affordability challenges play out differently market by market. The broader takeaway: strong new home sales don’t necessarily signal surging demand—it’s a sign builders are “giving away the farm” to clear supply. It's also a clear indication that demand for housing does exist, it's just sidelined by high rates and high closing costs. 

PCE Inflation and the week ahead

PCE inflation data held at 2.9% as expected - a nice win for homebuyers. This week is a HUGE test for mortgage rates as labor data pours in. We'll see lower mortgage rates if the labor data pouring in is worse than expected.

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