Welcome to the latest edition of The Full Measure, where we analyze the latest developments in the housing market and their impact on real estate appraisers.
As we move toward the end of summer, the housing market is caught between shifting monetary policy signals, a modest rise in inventory, and the stubborn weight of affordability challenges. For appraisers, this month’s backdrop offers both clarity and caution: there are more comparable sales to analyze, but the quality and timing of those comps matter more than ever.
Powell Hints at Rate Cuts—But Not Just Yet
At the Federal Reserve’s annual symposium in Jackson Hole, Chair Jerome Powell struck a noticeably different tone than earlier this year. He suggested the Fed is preparing to “rebalance” monetary policy around a 2% inflation target, opening the door to a possible rate cut in September (Eye on Housing, Aug. 23, 2025). Analysts at RSM described his remarks as the “clearest signal yet” that the central bank is shifting from its restrictive stance toward easing (RSM Real Economy, Aug. 23, 2025).
Realtor.com echoed that markets interpreted Powell’s comments as a signal that the Fed will soon begin lowering borrowing costs, though Powell emphasized that any decision will remain data-dependent (Realtor.com, Aug. 23, 2025). Inflation has cooled, but unevenly. Shelter costs, in particular, continue to rise faster than the Fed would like.
For appraisers, the key takeaway is straightforward: while rate cuts may be on the horizon, mortgage rates are unlikely to fall sharply in the near term. Buyers hoping for a return to 4% mortgages are likely to be disappointed.
Mortgage Rates: A Plateau Before the Drop
According to Freddie Mac’s August 21 update, the average 30-year fixed mortgage rate is holding between 6.7% and 6.9% (Freddie Mac, Aug. 21, 2025). That’s down slightly from earlier summer peaks, but still high enough to keep many buyers on the sidelines.
Realtor.com points out that affordability remains the central hurdle. Higher rates combined with record prices are weighing heavily on first-time buyers, many of whom are already stretched thin by student debt and rising living costs (Realtor.com, Aug. 21, 2025). If the Fed follows through with a September cut, rates could edge into the mid-6s, but meaningful relief will likely require multiple rounds of easing.
For appraisers, this means that demand conditions remain muted. Even if rates drift lower, affordability will continue to constrain the buyer pool—especially in higher-priced markets.
Inventory Is Growing—But Buyers Are Hesitant
One of the most significant developments this summer has been the slow but steady increase in housing supply. NAHB reported that single-family housing starts edged higher in July, with builders cautiously adding to production despite the headwinds of affordability (Eye on Housing, Aug. 20, 2025).
Meanwhile, July existing home sales rose 2% to 4.01 million, marking the first increase since January (Realtor.com, Aug. 22, 2025). While welcome, buyers continue to hesitate, constrained by borrowing costs and uncertainty about where the economy is heading.
Nationwide, months of supply is now hovering around 4.5 to 4.7 months—compared to 4.3 months in June 2019 and trending toward the 5.0 threshold that typically puts downward pressure on prices (NAHB, Aug. 2025).
For appraisers, the impact is two-fold:
- More comps are available, which can improve valuation reliability.
- But longer marketing times and wider pricing spreads mean greater care is required in selecting and adjusting comps.
Prices: The Deceleration Continues
While supply is rising, prices are no longer surging. Median home prices grew just 2% year-over-year in July, according to Realtor.com’s analysis of NAR data (Realtor.com, Aug. 22, 2025). On a seasonally adjusted basis, prices are showing slight month-to-month declines.
This reflects what I’ve called in past editions the “lag trap”: comps from three to six months ago may reflect a very different pricing environment. Case-Shiller data confirm that prices have declined for several consecutive months, illustrating how contract dates and closing dates often lag current market conditions.
For appraisers, this means negative time adjustments—once rare—are now becoming a necessary part of credible reports. Failing to account for deceleration risks overvaluing properties in today’s climate.
Regional Shifts: Affordability and Climate Risks
Affordability is now the dominant driver of regional demand. NAHB notes that Midwest and Northeast metros are seeing increased activity, thanks to lower home prices and lower climate risks (NAHB, Aug. 2025).
By contrast, affordability challenges remain acute in high-cost coastal markets. At the same time, climate-risk factors are reshaping demand. A recent Realtor.com analysis highlights how markets like Manchester-Nashua, New Hampshire, benefit from both affordability and lower exposure to climate-related risks, while markets in Florida, Texas, and California face higher long-term vulnerability (LinkedIn: Cotality, Aug. 2025).
For appraisers, these shifts mean paying close attention to regional divergence. Demand patterns in your local market may move very differently than the national averages, especially if your region benefits from relative affordability or lower exposure to natural hazards.
What This Means for Appraisers
The August 2025 data paints a picture of a housing market in transition. For those of us tasked with valuing property, several points stand out:
- Mortgage rates remain high but could ease if the Fed cuts in September. Relief will be gradual.
- Inventory is building, giving us more comps but requiring sharper judgment about recency and relevance.
- Price growth is decelerating, meaning negative time adjustments may become standard practice in many markets.
- Regional differences are widening, with affordability and climate risk shaping demand more than national averages.
The days of uniform appreciation across the country are behind us. Instead, we are entering a more nuanced, regionally varied market where careful analysis separates good appraisal work from great work.
Final Thoughts
The national data is useful for context, but as always, the real insight comes from understanding your local market. Ask yourself: how does my region fit into this broader story of easing rates, rising inventory, and affordability pressures? Are buyers showing up in greater numbers, or are they still hesitant despite more listings?
The role of the appraiser is more important than ever in this environment. Our job is not simply to reflect past sales, but to interpret where the market is today and where it may be heading tomorrow.
Stay sharp, stay informed, and remember: in a market this dynamic, being accurate matters far more than being fast.
Keep your appraisal skills sharp and stay up-to-date with your licensing with McKissock’s appraisal continuing education courses.
