Growth concerns push down rates

The recent slide in mortgage rates was triggered by July’s employment report from the Bureau of Labor Statistics. Significant downward revisions to prior months’ data reshaped the narrative of a robust labor market, revealing one that is cooling faster than previously thought. This shift heightened market expectations that the Federal Reserve may soon need to cut interest rates to support economic growth.

This week’s Consumer Price Index (CPI) report was closely watched, as stronger-than-expected inflation could have reversed the recent decline in rates. However, the headline CPI figures largely aligned with expectations. Although the data revealed signs that tariffs appear to be leaking into prices—a factor that could limit the Fed’s flexibility for rate cuts in coming months—markets have, for now, prioritized concerns about the weakening labor market. As a result, mortgage rates continue to face downward pressure.

Impact on the Housing Market

Despite slight mortgage rate improvement, affordability remains a serious barrier. Sellers, who have returned to the market in bigger numbers than buyers this year, are facing the realities of lingering listings and a smaller pool of qualified buyers. 

This dynamic creates a significant opportunity for those who can afford to purchase a home. With less competition, today’s buyers benefit from lower mortgage rates, more inventory, and improved negotiating power. The market continues to shift in their favor. Zillow’s market heat index shows 27 major metros now considered neutral or a buyer’s market — up three from last month — and a stark departure from the fiercely competitive seller’s markets of recent years.