1) Jobs, Not Just Rates, Drive the Housing Market

“Jobs buy homes.” Mortgage rates matter, but steady employment and rising wages matter more. With unemployment around 4.1% (the Federal Reserve has floated a potential year-end view near 4.5%), confidence in job security is the primary fuel for demand.

A “hot” economy is not automatically inflationary. Inflation shows up when money chases too few goods—exactly what happened during the pandemic when cash surged and supply chains were constrained. Today, with production normalizing and wages running modestly above inflation, growth can remain healthy without forcing rates dramatically higher.

2) Fiscal Policy Sets the Field. Monetary Policy Moves the Goalposts.

Fiscal policy—the rules, caps, and regulations set by Congress and the Administration—creates the clarity businesses need to invest and hire. The class cited September as the biggest month for M&A (mergers and acquisitions) in 25 years, a sign that clearer rules spur action. Investment → jobs → housing demand.

Monetary policy—what the Federal Reserve controls—uses rates to influence borrowing costs, but it’s a blunt instrument. It can’t directly create jobs or fix supply chains. For housing, the key question is: does a policy headline increase clarity for businesses? If yes, expect steadier hiring and more consistent demand.

3) Don’t Wait for the Fed: Watch the Bond Market Instead

A common misconception is that mortgage rates drop just because the Fed cuts. In reality, mortgage pricing takes its cues from the 10-year U.S. Treasury yield, not the Fed Funds rate.

• In a recent episode, the Fed cut by 50 bps and then 25/25, yet the 10-year rose by ~100 bps—and mortgage rates followed the 10-year higher.
• Key technical levels: ~4.20% on the 10-year acted as a ceiling on improvement for much of the past year. Slipping below 4.00% is treated as a potential “game-changer” for better mortgage pricing.
• Spread matters: A typical mortgage–10-year spread near 1.75% widened to ~3.00% during high volatility. Recently it’s narrowed to about 2.20–2.25%, leaving room for roughly another 0.50% improvement in mortgage rates even if the 10-year doesn’t move.

Practical tip: When the 10-year dips and the spread compresses, ask your lender to re-run scenarios—small moves can deliver meaningful monthly savings.

4) Inflation Is Cooling, but Prices Rarely Roll Back

Quick definitions from the class:

• Inflation: prices rising.
• Disinflation: prices rising more slowly (e.g., from 9% down to ~2.9%).
• Deflation: prices falling outright—rare and economically harmful.

The Fed’s preferred gauge, Core PCE, has run about 2.9% over the last 12 months. Monthly readings near 0.2% (annualized ~2.4%) plus high prior months rolling off could pull the 12-month rate toward ~2.5% if the trend persists.

Even so, don’t expect 2020 price levels to return. The goal isn’t to rewind prices but to bend the curve back toward ~2% annual inflation. Also remember: not all inflation is equal. Durable goods often get cheaper; the “three H’s”—Housing, Healthcare, Higher Education—tend to run hotter. Housing alone is roughly 25–30% of the inflation basket, which is why increasing supply is so powerful for long-term affordability.

5) Oil Prices and Mortgage Rates Often Zigzag Together

The class highlighted how oil prices and 30-year mortgage rates frequently move in tandem. When oil falls, inflation expectations ease and rates often follow. When oil rises, both tend to climb.

Analysts pointed to mid-September 2024, when oil and 30-year rates hit their yearly lows within the same 24-hour period. If oil holds in the $50s, that’s disinflationary and usually friendlier for rates. Lower energy costs also act like a tax cut for households—especially for those spending most of their budget on food, fuel, and shelter.

6) The Fed’s Pandemic Playbook Still Shapes Today

Quantitative easing (QE) early in the pandemic stabilized mortgage bonds—critical and effective. But purchases continued for about a year too long, pushing mortgage rates into the 2s/low 3s and fueling 20–25% annual home price gains—tough on today’s affordability. The lesson: policy doesn’t always translate cleanly to today’s rate sheet. The bond market remains your best guide.

7) Emotion

Ok, this is my add, not from the class.  Today’s market is more emotional than ever.  Buyers don’t want project.

What This Means for Portland Buyers and Sellers

• Buyers: Prioritize job stability, savings, and payment comfort. Use dips in the 10-year and spread compression to your advantage; even a small rate improvement can materially change affordability.
• Sellers: Rate windows under a mid-6% handle can widen the active buyer pool. More inventory supports healthier, single-digit appreciation rather than outsized spikes.
• Everyone: Oil trends, the 10-year Treasury, and inflation updates may seem distant—but they directly affect how far your housing dollar goes in the Portland metro.
• Owner: The image above is from the St. Louis Federal Reserve, is there an opportunity to refinance if you bought at the peak?

The encouraging setup for 2026: disinflation progress, resilient employment, and narrowing mortgage spreads. That trio points to a calmer, more balanced market.

Bottom Line

When you hear about the Fed, inflation, or oil prices, translate it this way:

• Jobs buy homes—confidence in employment comes first.
• The bond market (especially the 10-year) is the cleanest signal for mortgage rates.
• Policy clarity breeds business confidence—and confidence supports housing.