Macro Signals for October 2025

Housing Economics

US housing market conditions are mixed heading into October

What happened: US new home sales jumped by 20.5% in August, reaching their highest level in more than three-and-a-half years. However, there is a consensus of caution among economists analyzing the data, pointing out that other housing indicators continue to signal weakness.

Why it matters: New home sales data tends to be volatile from month to month and is often subject to significant revisions later. Examining anecdotal reports, such as homebuilder sentiment data, provides a view from earlier in the housing market pipeline.

According to NAHB data, Builders reported stagnant current sales conditions in September and a decline in homebuyer traffic from the previous month. 39% report cutting prices to make sales, the highest share in the post-pandemic period.

Although home builders and other sectors show an improving six-month-ahead outlook as borrowing costs are expected to come down, there are still several cyclical challenges that weigh on the housing market.

For starters, average monthly mortgage payments are nearly double pre-pandemic levels, while many homeowners remain "locked-in" to low-rate mortgages secured before the Fed’s tightening cycle. Mortgage rates have started to decline in recent weeks, and as evident in the rise in pending home sales in August (+4.0%), this has encouraged renewed purchase activity in regions with higher affordability, such as the Midwest.

However, modest reductions in mortgage rates may still be too prohibitive to unstrap existing homeowners wishing to relocate, particularly in less-affordable regions.

Second, a sluggish job market narrows the pool of younger, potential new homebuyers who avoid the lock-in problem but have the financial means to meet credit lending standards.

Building permits also sit at a two-and-a-half-year low, a result of both lower purchase demand and construction cost barriers impacting the broader residential sector. According to the September results of its survey on apartment conditions, the National Multifamily Housing Council reports that 46% of multifamily developers experienced project delays, an increase from its June results.

Falling interest rates may create conditions for residential market fundamentals to strengthen, but current indicators suggest we’re not yet in the clear.

Housing Policy

Bessent sparks ‘National Housing Emergency’ speculation as Congress battles over the budget.

What happened: US Treasury Secretary Scott Bessent drew attention in early September when he suggested that President Trump may declare a national housing emergency this fall to try to address ongoing supply and affordability challenges.

Why it Matters: Bessent declined to provide details of a plan, and through the end of September, neither the White House nor any federal agency has introduced new rules or guidance tied to such an emergency mandate. Nonetheless, the Treasury Secretary suggests that “everything is on the table”, including searching for ways to standardize building and local zoning codes, and even potential tariff exemptions for some construction materials.

The announcement swiftly garnered attention and policy engagement from corners of the industry that have long highlighted a need for supply-side reforms to tackle affordability challenges.

Organizations such as the National Association of Home Builders (NAHB) and the National Multifamily Housing Coalition (NMHC) welcomed the suggestion, highlighting their own proposals for supply expansion, including addressing construction labor shortages, reducing regulatory barriers, and resolving supply chain bottlenecks.

However, ongoing budget negotiations and a likely government shutdown loom over the housing policy debate.

Primarily, this involves determining the 2026 funding levels for key housing programs administered by the Department of Housing and Urban Development (HUD) and other federal entities, such as the Community Development Financial Institutions (CDFI).

Additionally, there are multiple ongoing efforts in both the House and Senate to advance affordable housing and community development legislation, including the bipartisan ROAD to Housing Act, which some in the Senate are pushing to include in Congress's must-pass defense funding bill.

The outcome of congressional efforts may influence whether—and how—the White House proceeds with executive action on housing. Furthermore, rather than framing the housing crisis as a national emergency, the Administration could opt for a narrower executive order related to housing supply, which may face less judicial pushback.

Monetary Policy

After Fed cut, the path and pace of rate cuts now come into focus.

What Happened: Following the Federal Reserve's 25-basis-point (bp) cut to the benchmark Federal Funds rate at its September meeting, attention has now shifted to the path and pace of future rate cuts.

Officials overwhelmingly voted for the quarter-percentage-point cut in September, and Fed Fund futures see a 97.2% likelihood of an equivalent cut at the October 29^th policy meeting.

However, forecasts beyond October remain less certain. Just over half (57.9%) of the market is pricing in 50 basis points (bps) of cuts through January, with the remainder unevenly split between more or fewer cuts.

Why it matters: Although job growth slowed significantly over the summer and prompted officials to take action, they also raised their GDP growth forecast for both this year and next in their most recent summary of economic projections.

The projections also indicate that officials, on average, expect rates to continue declining, even with inflation projected to remain above target.

Core-PCE inflation remains up 2.9% year-over-year through August. Monthly inflation rates have stabilized recently, but there is debate over whether tariff-related cost pressures have fully passed through yet.

Kansas City Fed President Jeffrey Schmid labelled the September rate cut a “reasonable risk-management strategy” given the “heightened concern over the health of the labor market,” but that additional cuts will depend on how the data develops. Elsewhere, Fed Vice Chair Michelle Bowman argues for significant cuts to stave off a weakening labor market.

September jobs and inflation data will help shape how officials view the appropriate balance in their mandate.