1. Federal Reserve Eases Rates – What Do Future Cuts Look Like?
As expected, the Federal Reserve eased short-term interest rates by a modest 25 basis points in October. In its statement, the Fed alluded to the notion that it was ending its quantitative tightening cycle, but it remained on the sidelines for future rate cuts. Fed officials remain leery of tariff-induced inflation risk, despite what appears to be softening in the labor market. As a recap, the Fed has a dual mandate: full employment and price stability (keeping inflation tame). Those two factors can fight each other from time to time, and this is one of those periods.
Labor market challenges are often a lagging indicator, and by the time we see the pressure show up via labor data, it is often too late. Companies’ trim headcount as a result of accumulating economic stress and reporting those layoffs is typically one of the last adjustments that it will make.
Which brings us to the Fed, interest rates, and real estate. With the government still shutdown (at the time of writing), the Fed remains in a data blackout. It has little actual data to go on for making decisions. It could see continued weak labor data and fall back into its planned cuts of another quarter point in December followed by one in January/February. But officials also echoed that if labor data is stable (and recent private sector data showed it remained stable through October), it could pull one or more of those cuts off the table.
For mortgages, they are closely tied to long-term US Treasury yield rates, typically found in the 10-Year Bond. Recently, bond yields have been easing on hopes that the Fed will ease short-term rates. The 10Y has pierced the 4% threshold and if it sticks below 4%, it would be a trigger for some residential housing activity. Again, it is all connected. If the Federal Reserve does not like what it sees in the labor data once the government reopens, it could make comments that will push the 10Y back above 4%. Stay tuned.
Additional Reading: Latest Federal Reserve Statement
2. States and Population Changes
This is not a political piece, but there are some trends taking place in the US that bear watching pertaining to population shifts. And given the results of the most recent state-level elections, one might question whether this internal migration will become a greater factor.
There are two key population metrics that need to be understood to know what is really happening in US states. Domestic migration refers to people relocating from within the US to another state. And then international immigration fills another important component part of that equation.
Based on the latest data, and what we see published most frequently, the states losing the most in domestic migration between 2023-2024 include California (-239,575), New York (-120,917), Illinois (-56,235), New Jersey (-35,554), Pennsylvania (~-25,000), and Louisianna (~-15,000).
But, when looking at total population changes in the country by the number of people added to a state, we get a different picture. Including international immigration (remember that this was between 2023-2024 and before deportation activity), the top states were Texas (+562,941), Florida (+467,347), California (+232,570), North Carolina (+164,835), New York (+129,209), Georgia (+116,446), and Arizona (+109,357).
Deportations will obviously impact these figures for 2025 (and what has been experienced in Real Estate markets), but not as much as expected.
After the November 4th election, some regions of the country will likely see increased domestic migration gains/losses. With areas like Dallas becoming new financial centers for the world, spillover corridors stretching up and down I35, I40, and regions in the southeast are poised to gain population once again. These real estate markets should gain a mild boost from this shift while other regions that are focused on higher taxation of corporations could face pressure and more population losses.
Source: Census Bureau
