Strong jobs report casts doubt on third rate cut in 2025 

With government economic data flowing once again now that the shutdown has ended, a long-awaited report contains indicators that the real estate industry can feel optimistic about — but it also brings warning signals.

The delayed September jobs report released on Nov. 20 showed that the U.S. economy added 119,000 jobs that month, beating expectations. However, the unemployment rate increased more than expected to 4.4% and wage growth was modest, rising just 0.2% compared to August.

Third rate cut less certain after strong job gains

While job growth is generally good news for home sales, it may make the Federal Reserve more cautious when it considers whether to cut short-term interest rates for a third time this year at its December meeting.

"Inflation hawks will point to still-solid payroll gains and wage growth running at nearly 4% annually as evidence that the Fed should avoid cutting again too soon," Realtor.com Senior Economist Jake Krimmel said. "Doves will counter that the unemployment rate is finally showing some troubling signs: edging toward 4.5% in September may mean we are already there right now in mid-November, let alone December."

As a result of the shutdown, the Bureau of Labor Statistics has said it will not release an October jobs report and is delaying the release of its November report until Dec. 16. The agency's September report thus contains the last batch of government-released jobs data that the Fed will see before its Dec. 9-10 meeting.

This leaves the central bank with a foggy picture of the U.S. economy's health as officials make their next monetary policy decisions, according to First American Senior Economist Sam Williamson.

"With a December rate cut still far from certain, mortgage rates are likely to stay close to current levels for now," Williamson said. "Even so, they're now sitting near one-year lows and have pulled back from about 7 percent in January, giving buyers a bit more breathing room."

Existing home sales rise

While the shutdown had many economic impacts, it didn't appear to significantly delay existing home sales. These sales increased 1.2% from September to October to a seasonally adjusted annual rate of 4.1 million, according to the National Association of Realtors — a 1.7% year-over-year increase that met expectations. Meanwhile, home prices continued to climb, with the median existing home sales price hitting $415,200 in October, or 2.1% higher than a year ago.

The existing home sales uptick occurred despite the shutdown because mortgage rates have dropped from higher levels seen earlier this year, according to NAR Chief Economist Lawrence Yun. But the buyer experience is not the same in every part of the country, he noted.

"First-time homebuyers are facing headwinds in the Northeast due to a lack of supply and in the West because of high home prices," Yun said. "First-time buyers fared better in the Midwest because of the plentiful supply of affordable houses and in the South because there is sufficient inventory."

Mortgage rates hold steady

The 30-year fixed-rate mortgage remains near the lowest level of the year, although rates did rise slightly this week. According to Freddie Mac's weekly survey, the 30-year rate averaged 6.26% as of Nov. 20, up from 6.24% a week earlier.

Mortgage rate stability is building some confidence in the market even with widespread economic uncertainty, according to One Real Mortgage CEO Samir Dedhia.

"We're seeing purchase and refinance activity stabilize, supported by growing inventory and less pressure on home prices," Dedhia said. "For homeowners who have been waiting for the right moment to refinance, these steady declines and lower volatility are helping tip the scale."

Even so, mortgage applications decreased this week, according to the Mortgage Bankers Association. The seasonally adjusted purchase index dropped 2% for the week ending on Nov. 14 compared to one week prior, but was still 26% higher than a year ago when 30-year mortgage rates were at 6.84%.

Builder sentiment remains low

Economic uncertainty and tariff impacts are keeping builder confidence firmly in negative territory, according to the National Association of Home Builders (NAHB). Builder confidence rose slightly from 37 in October to 38 in November, with levels remaining below 40 since April.

The NAHB's latest Housing Market Index found that 41% of builders cut prices in early November, "a record high in the post-Covid period and the first time this measure has passed 40%," the survey noted.

"We continue to see demand-side weakness as a softening labor market and stretched consumer finances are contributing to a difficult sales environment," wrote Robert Dietz, chief economist at NAHB.