Mortgage Research Network Podcast

Welcome to the Mortgage Research Network Podcast. We bring you the latest mortgage and real estate news 3 times a week. The audio is AI generated, but content is fact-checked by me, Tim Lucas, editor of MortgageResearch.com and a former mortgage professional. And with me is Craig Berry, a mortgage originator with 25 years experience. Craig, The Federal Reserve just made a move that hasn't happened since 2019. Three members disagreed with the decision to cut rates on at the December Fed meeting. And that's just the beginning of what makes this economic moment so fascinating.

They cut rates by 0.25%, bringing us to a range of 3.50-3.75%. What's really interesting is how divided the Fed seems to be on the path forward.

Well, here's what makes this so complex. One member wanted a bigger cut, while two wanted no change at all. And they had to make this huge decision without complete employment data because of the government shutdown.

That's like trying to perform surgery wearing a blindfold. How did they manage to make such an important decision with limited data?

You know what's really concerning? The data we do have shows job losses in two of the last four months. Something we haven't seen outside of COVID in a decade. We're only adding about 58,500 jobs monthly on average, down from 171,000 in the previous two years.

And the St. Louis Fed says we need 153,000 new jobs monthly just to keep up with population growth, right?

Exactly. Also, Powell made some pretty striking comments about the housing market during his press conference. He basically told everyone not to get excited about this rate cut helping housing, since a quarter-point reduction won't make much difference when the real problem is inventory.

That's quite different from what many people might expect from a rate cut.

Right. And here's where it gets really interesting. Powell suggested that the best way to deal with high prices isn't aggressive rate cuts, but creating conditions where incomes outpace inflation over several years. It's a much longer-term perspective than most people realize.

The way he talked about inflation and employment was fascinating too. Trying to thread this needle between reducing inflation to 2% without causing job losses.

And that task just got more complicated with his warning about tariffs. He's expecting tariff-induced price increases to peak in early 2026, but then level off unless new tariffs are announced.

So what does all this mean for current mortgage rates?

Well, we're still bouncing around between the low and mid sixes for a 30-year fixed. Major agencies expect rates to be around 6.2% in 2026. But a lot can change based on the labor market. In short, if the labor market tanks, rates could go much lower as markets price in Fed help in the form of lower rates. The unemployment rate has crept up to 4.4% from 3.8% two years ago, even with the Fed cutting rates by 0.75% in just the last three meetings.

The inflation numbers at least seem to be moving in the right direction, at 2.6% based on PCE readings.

True, but policies meant to boost employment through lower rates could actually increase inflation. It's a little like trying to push both sides of a seesaw down at the same time. And what's also interesting about this meeting is that Powell might not even be in his position much longer, as his Chair position ends in May 2026. Though he insists the political pressure isn't affecting Fed decisions.

Looking ahead, what should people be watching for?

You know, with the government reopening, we should start getting more regular economic data again, but there's this information gap that can't be filled. The shutdown was too long to simply catch up on all the missed data collection. And the housing inventory problem Powell mentioned? That's going to need policy changes beyond what the Fed can do.

The market's reaction has been surprisingly positive though, hasn't it?

Yes, despite Powell's cautious tone. But here's the bottom line. While the Fed is actively working to help the economy, there's no quick fix here. We're in for a period of careful adjustments rather than dramatic changes, and anyone involved in the housing market needs to plan accordingly. The days of expecting dramatic Fed moves to solve all our economic challenges? Those might be behind us. That's about all the time we have for this topic, but we go into even more detail on the site. For more, search December fed meeting at Mortgage research.com. We'll see you next time on the Mortgage Research Network Podcast.