Summer Job Slowdown May Lead To Lower Mortgage Rates

Federal Reserve Chairman Jerome Powell and policymakers on the Federal Open Market Committee meet in December to weigh whether to cut interest rates further. (Kent Nishimura/Bloomberg via Getty Images)

Why a Summer Slowdown in Jobs Could Push Mortgage Rates Lower

The latest employment report from the Bureau of Labor Statistics reveals a clear trend: the labor market softened during late summer and early fall. This slowdown could influence Federal Reserve decisions and, ultimately, mortgage rates.

Labor Market Shows Signs of Weakness

The September report, released last week, revised earlier estimates. July had 7,000 fewer jobs than initially reported, and August saw a decline of 4,000 jobs. Although September showed modest growth, the bureau noted that employment has “shown little change since April.” Additionally, the unemployment rate in September was 0.3 percentage points higher than a year ago.

What This Means for Interest Rates

If employment conditions fail to improve—or inflation does not worsen—the Federal Reserve may cut interest rates again in December. At its October meeting, the Fed lowered the federal funds rate by 0.25%, citing concerns about a weakening job market. Analysts now predict a two-thirds chance of another cut in December.

However, a lower short-term rate does not automatically reduce mortgage rates. Fortunately, the Fed ended its “quantitative tightening” (QT) policy in October. QT had kept long-term rates, including mortgages, elevated. Ending QT should ease pressure on mortgage rates, making homebuying more affordable.

Housing Market Responds

Signs of improvement are already visible. Existing home sales rose in October after three months of decline, according to the National Association of Realtors. The Midwest led with a 5.3% increase, while the South also saw gains. Year-over-year, the Northeast posted the strongest relative growth at 4.3%.

Moderate home price increases and declining mortgage rates since May have boosted buyer confidence. Although rates ticked up slightly this week, they remain lower than earlier this year.

Builders See Slight Optimism

Homebuilder sentiment has improved slightly. The National Association of Home Builders reported that more than 40% of builders cut prices to attract buyers. The Census Bureau confirmed more new homes were completed in July and August. Still, new construction faces challenges: permits for single-family homes have declined for four consecutive months, and homes under construction fell by 15,000 in August.

Looking Ahead

The housing market appears balanced for now, with stable prices and lower rates supporting demand. Inventory gains should keep sales strong through early 2026. However, if mortgage rates continue to fall while new construction lags, supply shortages could emerge.

Have real estate questions or need expert advice? Contact Chesko and Cavallo Realty Group today at 717-553-0686 or email us at info@cheskoandcavallo.com. We’re ready to help you every step of the way!