Portland Mortgage Market Update — December 12, 2025

Yay, it's Fed Week! The market was anticipating a .25 cut to the Fed Funds rate, but a reticent cut where Powell would basically say "fine, we will cut this last time but we aren't cutting again until we REALLY need it!" And he kind of did just that, but also dropped some nuggets that left the market optimistic about the future:

• While Chairman Powell pointed to a robust and "extraordinary economy," he also acknowledged how broken the BLS Labor data is saying that of late they are expected to be OVER estimating the job market by 60,000 jobs per report. That means a report that shows an increase of 40,000 jobs will ultimately be revised to show a 20,000 job loss. • He said that any inflation showing over 2% right now is a direct result of tariffs. The Fed's target inflation is 2%, and since the sole purpose of the Fed is to balance inflation vs the job market, if we strip out tariffs it sounds like inflation is pretty much in check. Yes, prices are higher than they have been in the past, but that is a result of inflation that has already happened (for prices to come down, inflation would have to be negative causing "deflation" which is very not good for an economy). With inflation in check, the Fed will likely be focusing on the labor market in the coming months to determine their course of action • Speaking of their course of action, they released their dot-plot chart which is a poll taken of each Fed member with their estimate of where the Fed Funds rate will go in the coming year. Most of the dot-plot indicated only one rate cut next year, but we can pretty much throw that out because Fed Chair Powell will be gone by May and the next Fed Chair that get installed by Trump will almost certainly be all about lowering rates. • Quantitative Easing is BACK baby! During Covid, the Fed bought up Trillions of dollars in securities to keep interest rates low and the economy moving. Since then they have been selling these securities on the open market, and with more supply of these means less demand. To create demand, they have to offer the securities with a higher yield, which is why rates have been elevated. But as of today, they are back in the business of buying up specific short-term securities. That being said, they are just dipping their toes into these waters right now, but shifting from selling to buying (even a little bit) is significant because it marks a massive change in ideology behind the Fed. The rate cut was already baked into mortgage pricing, but this was great news rates and they improved as a result.

Beyond the Fed, we got some interesting data from the Fannie Mae & Pulsenomics Expectations Survey for the 4th quarter. This includes input from the top 150 economists in the US, and it was very optimistic for home appreciation. It is expecting a 2.4% increase in pricing over the next year, and a whopping 20% home appreciation over the next 5 years! So it bears repeating to anyone on the fence, yes rates suck right now, but waiting is just going to cost you more down the road. Let's do a quick exercise illustrating this point:

• Buyer wants to buy a home for $500,000 with 5% down • Assuming a rate at 6.49%, they are looking at a principal and interest payment of $2999 • They want to wait a year for rates to go down, so next year they are back in the market but the home is now worth $512,000. The good news is rates are now 5.5% so their payment is only $2762, so they are saving $237/mo by waiting (yay!) • If they would have bought at the 6.49% rate though, they could refinance at that 5.5% rate and since they have a smaller loan, their payment would be $2697. Also, they already have $12,000 in equity since their $500K home is now worth $512K!

Lots of bullet points this week! That's all I have for now, but I am around all weekend to field any questions that might arise. Feel free to call anytime!