👋👋 Good morning real estate watchers! Today, we are going to talk about how the Fed’s latest vote wasn’t a monetary policy decision—it was a live reenactment of group chat chaos. One person yelled “cut more,” two yelled “do nothing,” and Jerome Powell stood there like a dad at Disney World saying, “Guys, we all agreed to be miserable together.”

But first, here’s what we’ve been paying attention to this week…

1️⃣ Progress-ish: Zillow predicts a 2026 housing market defined by modest 1.2% price growth, slightly higher sales, and mortgage rates stubbornly stuck above 6%, with improved affordability in some metros despite lackluster conditions. The forecast amounts to "things will be marginally less bad." (HW)

2️⃣ Brokefield: Brookfield's Wells Fargo Center South Tower in downtown LA is hitting the market with expected bids around $157 million; roughly one-third of its value from eight years ago and not nearly enough to cover the $263 million debt balance that's pressuring lenders into a fire sale. (TRD)

3️⃣ HOA No: Despite only 39% of homebuyers actually wanting to live in a homeowner's association, builders are going HOA-crazy again, with 65.7% of new homes in 2024 built within communities that regulate everything from your mailbox color to how long your grass can be; the second-highest rate ever recorded. (NAHB)

4️⃣ Affordable & Forgettable: The housing markets for 2026 are dominated by Northeastern and Midwestern "value-hubs" like Hartford, Rochester, Worcester, Toledo, and Providence; places nobody's ever fantasized about moving to but where chronic inventory shortages meet steady buyer demand from people priced out of expensive metros. Congratulations to these cities on becoming America's hottest markets by default. (Realtor.com)

5️⃣ Stale Mate: Commercial real estate deal volume turned negative year-over-year in October 2025 for the first time in nearly two years, marking a sharp reversal from the sector's post-pandemic recovery as high interest rates and economic uncertainty create a standoff between buyers and sellers who can't agree on prices. (CNBC)

TOP STORY

Jerome Powell spent Wednesday afternoon trying to explain why three of his colleagues couldn't agree on whether to cut interest rates, hold them steady, or slash them more aggressively. If that sounds like a central bank in crisis, you're not alone in thinking so.

Welcome to the Federal Reserve's 2025 finale: a quarter-point rate cut delivered with all the unity of a family dinner during an election year.

But, for the first time since 2019, three officials dissented on a single decision, and they couldn't even agree on which direction was wrong. Governor Stephen Miran wanted a half-point cut. Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeffrey Schmid wanted no cut at all. The 10-3 vote on Wednesday marked the third consecutive meeting with dissent, a streak not seen in modern Fed history.

"The discussions we have are as good as any we've had in my 14 years at the Fed, very thoughtful, respectful, and you just have people who have strong views," Powell said at his post-meeting press conference, sounding less like a central bank chair and more like a marriage counselor. This is exactly what someone says right before the couple separates their checking accounts.

For real estate professionals, homebuyers, and anyone with a pulse in the housing market, this discord matters. A lot.

The Fed lowered its benchmark rate to a range of 3.5% to 3.75% Wednesday, the third consecutive cut this year and the lowest level in more than three years. Mortgage rates, which don't move in lockstep with Fed policy but certainly take cues from it, have been volatile. The average 30-year fixed mortgage rate has fluctuated between 6.5% and 7.2% throughout 2025, never quite delivering the relief homebuyers hoped for when rate cuts began in September.

Here's where it gets interesting: The Fed's "dot plot" (the closely watched projection of where individual officials think rates should go) showed just one more rate cut expected in 2026. That's it. One. After three cuts this year, the central bank is essentially tapping the brakes.

But here's what the dot plot also revealed: Seven officials indicated they want zero cuts next year. That's right…More than a third of the committee believes rates should remain unchanged for the entire year of 2026. Four other nonvoting participants registered what the Fed calls "soft dissents," meaning they didn't formally vote no but made clear they disagreed with the decision.

"We're in the high end of the range of neutral," Powell explained, suggesting the Fed believes rates are now at a level that neither stimulates nor restricts economic growth. "It's so happened that we've cut three times. We haven't made any decision about January, but as I said, we think we're well-positioned to wait and see how the economy performs."

Translation: Don't hold your breath for significantly lower mortgage rates in 2026.

While the Fed debates quarter-point versus half-point cuts with the intensity of Supreme Court justices parsing constitutional text, the housing market remains stuck in its own purgatory. Mortgage applications are down. Home sales are sluggish. Inventory remains tight in many markets, though it's improving. And affordability (remember that?) hasn't budged much despite rate cuts.

The Fed raised its GDP growth projection for 2026 to 2.3%, up from 1.8% in September, suggesting optimism about the broader economy. But that growth isn't evenly distributed. Bank of America data cited in the Fed briefing showed that after-tax wage growth was 4% for higher-income households in November, versus just 1.4% for lower-income households—the very people who need help affording homes.

"Once you inflation-adjusted it, there was a modest increase in spending that was likely driven by upper-end consumers making big-ticket purchases," Joe Brusuelas, chief economist at RSM US, told CNN, describing the holiday shopping surge. It's what economists call a "K-shaped" recovery, where the wealthy do fine and everyone else white-knuckles their way through.

K-shaped is basically economist for: rich people are buying Pelotons for their Pelotons, and everyone else is Googling “Is a tent considered a starter home?”

For housing, this creates a peculiar dynamic: Luxury markets hum along while first-time buyers remain frozen out. The voluntary quits rate (how often workers feel confident enough to leave their jobs) fell to a five-year low, according to the Job Openings and Labor Turnover Survey. That's not exactly the foundation for a robust housing market.

"The labor market is becoming a much more exclusive club," Noah Yosif, chief economist at the American Staffing Association, explained. "Those on the inside, they're doing pretty well; but for those on the outside, it's getting harder and harder to break in."

People who struggle to break into the job market certainly face similar challenges in the housing market.

Adding intrigue to an already messy situation: Jerome Powell has just three meetings left as Fed chair. President Donald Trump has been clear about his preference for a successor who will cut rates more aggressively, transforming the traditionally independent central bank into something more akin to an extension of White House economic policy.

Prediction markets give National Economic Council Director Kevin Hassett a 72% chance of becoming the next Fed chair, according to Kalshi. On Wednesday, just moments before the Fed's announcement, Hassett went on Fox News to declare he would vote for a half-point cut if he were at the meeting.

"I think if you bring stronger data than he's been using to show people rationale for why they could have a bigger rate cut, you could get to 50 [basis] points or more," Hassett said, previewing what a Hassett-led Fed might look like.

Chris Rupkey, chief economist at FwdBonds, didn't mince words about what this means. "The winds of change are in the air. A new Fed chair in 2026, and perhaps many more new Fed officials, means more interest rate cuts are coming next year," he wrote in a note. "No one in the markets believe the Fed's forecasts for just one rate cut in 2026, no one, as new management is coming and the next Fed chair better align with the president's view on rates or suffer the consequences."

For housing, this creates both uncertainty and opportunity. If Trump's nominee delivers more aggressive cuts, mortgage rates could finally see meaningful relief. But if the Fed's independence erodes and rate decisions become politicized, long-term credibility suffers, and markets hate nothing more than uncertainty about central bank credibility.

Making matters worse, the Fed has been operating partially blind. The six-week government shutdown that ended in November left huge gaps in economic data. "Very little data on inflation has been released since our meeting in October," Powell noted Wednesday, mentioning the shutdown five times during his opening remarks.

The Fed relies heavily on government statistics for employment, inflation, and GDP (kinda important) to determine whether housing markets are healthy enough to support rate cuts. Without reliable data, Powell and his colleagues are essentially flying on instruments they can't fully trust.

"It is a very challenging situation," Powell admitted. "I think we are in a good place to, as I mentioned, to wait and see how the economy evolves."

For real estate professionals advising clients on when to buy, sell, or refinance, "wait and see" isn't exactly reassuring guidance.

The practical implications for housing heading into 2026 are surprisingly straightforward despite the Fed's internal chaos:

Mortgage rates will likely stay elevated. With only one projected rate cut next year and considerable disagreement within the Fed about even that, don't expect mortgage rates to drop dramatically. The 6% to 7% range is probably the new normal for now.

Affordability remains the crisis. Lower rates matter, but not if home prices stay high and wage growth remains tepid for most workers. The K-shaped economy means some buyers can afford homes while others remain locked out…Not a recipe for a healthy, balanced housing market.

Political uncertainty adds volatility. If Trump replaces Powell with someone committed to more aggressive rate cuts, markets will react. That could help housing or create chaos, depending on how the transition unfolds and whether the Fed's independence survives intact.

Regional variations will intensify. Noah Yosif's observation about the labor market becoming an "exclusive club" applies to housing markets too. Some metros will thrive while others struggle, depending on local job growth, inventory levels, and demographic trends.

The Fed's messy meeting on Wednesday didn't provide clarity so much as it revealed just how divided policymakers are about the economy's trajectory. For housing markets already navigating tight inventory, affordability challenges, and uncertain buyer demand, that discord isn't helpful.

Jerome Powell tried to frame the dissents as a healthy debate. "You just have people who have strong views, and we come together and we reach a place where we can make a decision," he said.

Sure. But when three people can't agree on whether to cut rates, hold them, or slash them more aggressively, "coming together" starts to look less like consensus and more like a coin flip.

For housing, that's the story of 2025…And likely 2026 as well. Rates that don't quite fall enough. Affordability that doesn't quite improve. A market that can't quite decide whether it's recovering or just treading water.

Powell says the Fed is "well positioned to wait and see." For the millions of Americans hoping to buy a home next year, the waiting is getting old.