Rates fall, policy debates rise, and Fed chair changes set the stage

Mortgage rates have officially dropped to their lowest levels since October 2024. The daily average mortgage rate fell to 6.57% as of August 4, marking a shift in some purchasing power back toward the buyer.

This change in the market was a result of the July jobs report released last Friday. The unemployment rate saw a slight increase, raising the chances of the Fed cutting interest rates in September. With a current surplus of homes for sale on the market, serious buyers have a window to jump in and even negotiate home prices down.

There was major news out of D.C. last week as Adriana Kugler resigned from her position as Fed governor and Erika McEntarfer was relieved of her duties as commissioner of the Bureau of Labor Statistics.

President Trump made the unprecedented move after the negative jobs report posted last Friday. He also announced that he will be appointing replacements for each role this week. While no firm candidates have been announced for the commissioner of the Bureau of Labor Statistics position, there is speculation that one of the future Fed chair candidates may take over the Fed governor position.

With the recent headlines around the Fed chair position, there has been plenty of chatter around who could replace Jerome Powell. While an official short list has yet to be announced, there are multiple rumored candidates in contention for the role.

Those include former Fed governor Kevin Warsh, National Economic Council Director Kevin Hassett, and Fed governor Christopher Waller. One candidate thought to be in the running, Treasury Secretary Scott Bessent, removed himself from the race and will instead be staying in his current role.

A potential shake-up in U.S. housing policy is brewing as the current administration floats proposals to expand or eliminate the capital gains tax on home sales. Homeowners pay capital gains tax when they sell homes that have increased in value by at least $250,000. Capital gains tax is paid at a rate of 0%, 15%, or 20%, depending on income, with most people paying no more than 15% according to the IRS.

Currently, homeowners can exclude up to $250,000 in profits as a single filer ($500,000 for couples filing jointly). For example, a couple who sells their primary residence for $700,000 more than they paid for it 10 years ago would potentially owe capital gains tax on $200,000 – the amount above the $500,000 exclusion – which comes up to a $30,000 tax bill on a 15% tax rate.

With nearly 26% of homes now exceeding that threshold, many longtime owners, especially in high-cost markets like California, Hawaii, and Massachusetts, are staying put to avoid a hefty tax bill. According to an estimate, those affected could owe over $20,000 in taxes, making many long-time owners, particularly retirees, reluctant to list.

Supporters argue that adjusting the exclusion could free up much-needed inventory by motivating baby boomers and other homeowners to finally sell. Critics counter that the benefits would primarily favor affluent homeowners in expensive coastal areas, doing little to solve broader affordability issues. Still, with bipartisan interest and election-year momentum building, this proposal could soon move from policy debate to market reality. If it does, expect a ripple effect across the housing landscape and maybe, just maybe, a few more for-sale signs.

·      August 14 – 17: Originator Connect, Las Vegas, NV (Free registration with code RocketFree)

·      August 14 – 16: FAMP Convention and Tradeshow 2025, Orlando, FL