Data shows inflation is moving in the wrong direction. But before the headlines send anyone into a panic, here’s what’s actually going on, why it matters for the housing market, and what it means if you’re thinking about buying or selling.

Inflation Went Up – Here’s What That Actually Means

The government tracks inflation in a variety of ways. One is something called PCE – the Personal Consumption Expenditures Price Index. It measures how much more (or less) people are paying for goods and services compared to a year ago. And just based on your own expenses, you can probably guess which way that’s trending.

That’s the one everyone is talking about right now. Check out the yellow line to see how that’s spiked since February (see graph below). A big driver of this jump is the ongoing conflict in the Middle East, which has pushed gas and energy prices significantly higher.

Now, you may have noticed there’s a second line. The blue line shows core PCE. That’s the same measure, but with gas and energy prices stripped out. The Federal Reserve (the Fed) actually watches this number most closely because energy prices swing around a lot and can be misleading.

And here’s the somewhat encouraging part.

Core PCE is rising, but not nearly as fast as the overall number. That suggests a good chunk of the inflation spike we’re seeing right now is tied directly to what’s happening overseas. So, when that situation settles down, inflation may settle a bit, too.

Why This Matters for Mortgage Rates

Here’s the housing connection. When inflation is high, the Fed tends to keep the Federal Funds Rate elevated or even raise it to try to taper spending and cool inflation back down. And while it’s not a one-for-one relationship, that Federal Funds Rate can have an impact on your mortgage rate when you buy. 

Right now, based on the information we have, there’s roughly a 50/50 chance the Fed actually raises the Federal Funds Rate before the end of 2026, according to CME FedWatch (see graph below):

While it’s too soon to say where this goes for certain and if we’re headed for a rate hike, it does mean mortgage rates are probably not coming down as soon as most people were hoping.

If you’ve been waiting for rates to drop significantly before making a move, this report is a reminder that “higher for longer” is still very much on the table. It really all depends on where the economy goes from here. According to Bankrate:

“Oil prices and bond yields have dropped a bit . . . but they’re still way up compared to the start of spring. Until there’s a resolution to the war, look for both inflation and mortgage rates to stay high.”

But This Is Not 2008 – Not Even Close

Just remember, a tough economy does not equal a housing crash. The conditions today are very different from what led to the 2008 collapse. Here’s why:

• Inventory is still relatively low. There’s no flood of homes hitting the market.

• Most homeowners today have strong equity in their homes.

• Lending standards are far stricter than they were before 2008.

• Today’s challenge is affordability, not a wave of distressed underwater sellers.

Uncomfortable and unhealthy are not the same thing. The market feels hard right now, but “hard” and “crashing” are very different.

You Still Have Options. Here’s What To Do.

High rates don’t mean homeownership is out of reach. It just means the path looks a little different. There are real strategies that can help, depending on your situation:

• Ask your lender about different loan options. Adjustable-rate mortgages (ARMs) or rate buydowns may help lower your monthly payment in the short term.

• Explore first-time buyer programs, down payment assistance, or seller concessions that could help offset costs.

• Stay in close touch with a trusted agent and lender. When rates shift, and they will, you’ll want to be ready to move fast.

The right strategy, tailored to your goals, matters a lot more than waiting for the perfect moment that may never come.

Bottom Line

Inflation is still above where the Fed wants it, and that means mortgage rates are likely to stay elevated for a while. But for people who need to move, strategy matters far more than trying to perfectly time the market.

Wondering what this means for your specific situation? Connect with a local agent or lender.

Let’s be real with each other for a second about affordability. Because you deserve someone who will be honest and transparent about what’s going on, especially if you’ve got a move on your mind.

Here’s the full picture of what’s happening and why. The good – and the bad. So, you know what it truly means for your move. Because while rates are certainly a big part of affordability, they’re not the only factor at play.

Mortgage Rates Have Been Rising

After a year or more of rates trending down, they’ve started to climb again. And, if you’re looking to buy, that’s not what you want to see. But it has happened. And here’s why.

Uncertainty is the enemy of mortgage rates.

And with lingering global uncertainty, ongoing tensions in the Middle East, and inflation refusing to fully cool off, there’s a lot that’s having an effect on rates. Colin Robertson, Founder of The Truth About Mortgage, put it plainly:

“You can’t have $100 a barrel oil and not expect inflation to rise, which translates to higher bond yields and mortgage rates.”

Take a look at the graph below. It uses data from Mortgage News Daily to show just how much all of those factors have had an impact:

It’s a pretty sharp contrast from where we’ve been, in a relatively short window. And it’s probably making you wonder: Should I just wait this out? Will rates fall when the uncertainty eases?

It’s possible. But it all depends on how the ongoing geopolitical conflict plays out and whether inflation continues to run hot afterwards – and for how long.

Rates probably aren’t heading down until both of those things improve. And even when that does happen, experts agree rates likely won’t be dramatically lower – maybe in the low to mid-6s. That’s the reality, and it’s worth knowing.

So, should you wait for lower rates? The general consensus is, if you can afford to buy and you find a home you like, it’s still worth it. Because no one knows for sure when rates will start to come back down – and how long do you really want to put your life on hold?

Wages Are Outpacing Home Prices

You’ve probably heard that inflation is making everything more expensive, and there’s no shortage of headlines about the cost-of-living outpacing paychecks. It’s a legitimate concern. And maybe you’re feeling the pinch yourself. But here’s what doesn’t make the headlines. It’s not all bad news.

Data from the Federal Reserve Bank of Atlanta and Redfin shows wages have actually been growing faster than home prices.

• Recently, wages have been increasing at around 4% year-over-year. 

• And home price growth is closer to 2% year-over-year.

As a buyer, you want your income to rise faster than prices because that helps make your purchase more manageable financially, and it quietly chips away at the affordability challenge over time. That’s exactly what we’re seeing lately. And every little bit is going to help.

A big reason wages have been gaining ground on home prices? Home prices have actually stayed pretty steady.

Existing Home Prices Have Held Steady

Check out the graph below. It shows home price data from the National Association of Realtors (NAR) over the past 4 years. Notice anything? There’s been no dramatic runup, and no crash either. Just relative stability and slow growth:

Part of what’s keeping prices this stable is that buyers finally have more choices. That means less competition, more negotiating power, and more time to find the home that actually fits your life, not just the one you had to grab before someone else did.

And that gives you a chance to hopefully find something that works for your budget, even with today’s rates. At the same time, you’re not losing ground pricewise while you take time to make a careful decision.

Bottom Line

Yes, rates have been volatile, and global instability is keeping them from settling down anytime soon. There’s no sugarcoating that. But the full picture of affordability is more nuanced than the headlines suggest.

Want to run the real numbers for your situation? Talk with a local real estate agent. They’d love to show you what’s actually possible in today’s market. Reach out to set up a quick, no-pressure conversation.

The Federal Reserve (the Fed) meets this week, and expectations are high that they’ll cut the Federal Funds Rate. But does that mean mortgage rates will drop? Let’s clear up the confusion.

The Fed Doesn’t Directly Set Mortgage Rates

Right now, all eyes are on the Fed. Most economists expect they’ll cut the Federal Funds Rate at their mid-September meeting to try to head off a potential recession.

According to the CME FedWatch Tool, markets are already betting on it. There’s virtually a 100% chance of a September cut. And based on what we know now, there’s about a 92% chance it’ll be a small cut (25 basis points) and an 8% chance it will be a bigger cut (50 basis points):

So, what exactly is the Federal Funds Rate? It’s the short-term interest rate banks charge each other. It impacts borrowing costs across the economy, but it’s not the same thing as mortgage rates. Still, the Fed’s actions can shape the direction mortgage rates take next.

Why Markets Already Saw This Cut Coming

Here’s the part that may surprise you. Mortgage rates tend to respond to what the financial markets think the Fed will do, before the Fed officially acts. Basically, when markets anticipate a Fed cut, that outlook gets priced into mortgage rates ahead of time.

That’s exactly what happened after weaker-than-expected jobs reports on August 1 and September 5. Each time, mortgage rates ticked down as financial markets grew more confident a cut was coming soon. And even though inflation rose slightly in the latest CPI report, the Fed is still expected to make a cut.

So, if the Fed goes with a 25-basis point cut, as expected, that’s likely already baked in to current mortgage rates, and we may not see a dramatic drop.

But if they go bigger and drop their Federal Funds Rate by 50 basis points instead, mortgage rates could come down more than they already have.

So, Where Do Mortgage Rates Go from Here?

While the upcoming cut may not move the needle much, many experts expect the Fed could cut the Federal Funds Rate more than once before the end of the year. Of course, that’s if the economy continues to cool (see graph below):

As Sam Williamson, Senior Economist at First American, explains:

“For mortgage rates, investor confidence in a forthcoming rate-cutting cycle could help push borrowing costs lower in the back half of 2025, offering some relief to housing affordability and potentially helping to boost buyer demand and overall market activity.”

If multiple rate cuts happen, or even if markets just believe they will, mortgage rates could ease further in the months ahead. But here’s the catch – all of this depends on how the economy evolves. Surprise inflation data or unexpected shifts could quickly change the outlook.

Bottom Line

Mortgage rates likely won’t drop sharply overnight, and they won’t mirror the Fed’s moves one-for-one. But if the Fed begins a rate-cutting cycle, and markets continue to expect it, mortgage rates could trend lower later this year and into 2026.

If you’ve been waiting and watching the housing market, now’s the time to talk strategy. Even small changes in rates can make a meaningful difference in affordability, and understanding what’s ahead helps you make the best decision for your situation.