INTEREST RATE UPDATE: A NEW ERA UNDER WARSH
With the national and global unrest impacting our economy, the first half of 2026 hasn’t gone as real estate experts expected. We know interest rates are among the most critical factors buyers, sellers, and investors must consider as they make moves (or sit on the sidelines). So we at RE/MAX Alliance keep close watch of the Federal Reserve’s Fed rate and the economic conditions the committee assesses to make rate adjustments. As the Federal Rate decreases, it can have a significant trickle-down effect on mortgage rates.
Who is the Federal Reserve? Read here.
The Fed wants to drop and stabilize interest rates once our economy slows down. Last month, the new committee chair, Kevin Warsh, was sworn in and is shifting their focus to a dual mandate: price stability (controlling inflation) and maximum employment. He has less tolerance for inflation running above 2% for extended periods. As he reexamines how inflation is measured, the committee may potentially adopt newer methodologies.
So with Warsh’s belief that interest rates should be the Fed’s primary tool for fighting inflation, we should expect a continued reduction of holdings through bond maturities and possibly asset sales. However, he acknowledges that doing so too aggressively could hurt the economy. Here is where our economy currently stands:
Job Market: Mixed
With March and April reports showing solid growth in employment, May was expected to follow suit at about 95,000 new jobs. However it surprised us with 122,000. The latest Jobs Reports have shown the unemployment rate hovering around 4.3-4.4%. The Federal Reserve wants unemployment to hit 4.4%.
Consumer Spending: Slowing
While Americans did spend slightly more month-over-month (+0.5% in April according to the U.S. May Consumer Spending report), it was mostly absorbed by inflation, which continues to climb. The Federal Reserve wants to see a significant drop in spending (mainly in areas like retail and housing). We are likely heading that direction as Consumer Confidence declined again to 93.1 (down from 93.8). The first quarter of 2026’s GDP (Gross Domestic Product) markedly grew to 1.6%. Q4 of 2025 was only 0.5%.
Inflation
2.2% is the Federal Reserve’s goal. However, the latest Core CPI (Consumer Price Index that excludes food and energy) at 2.8%, an increase from the previous month’s 3.2% If the trend continues, it could help with rates.
AI, Oil & Geo-politics
Warsh has also suggested that productivity gains from artificial intelligence could help support lower interest rates over time. However, other experts have noted that inflation risks, including energy disruptions and geopolitical conflicts, could limit how much room the committee has to cut rates.
So could rates drop this year? It is a big MAYBE. For now the Fed plans to hold rates at their current levels.
But there are silver linings!
• The Federal Reserve Committee does not plan to increase the rate! This is welcome news.
• With interest rates only making small fluctuations, that stability gives homebuyers confidence that their strategy will succeed in this market.
• Buyers have adapted to interest rates hovering in the mid-6s. Our spring market along the Front Range picked up steam, and many communities had more homes for sale than in the last ten years.
Read: Is Our Market STILL Correcting Itself?
You can still find success in 2026. Buyers, if you can afford a monthly mortgage payment, make a move soon. With markets slowing down for the summer, you have more negotiating power now than over the last few years. Your RE/MAX Alliance Agent will empower you with local market data and strategies to reduce your purchasing costs.
Sellers, using traditional tactics (home improvements, staging, excellent marketing), can improve your return. Summer is the optimal time to prepare your home for the fall market. Talk with your RE/MAX Alliance agent as soon as possible to start preparations.
Sources: cfr.org, usnews.com, federalreserve.gov, freddiemac.com, mortgagenewsdaily.com, Home Mortgage Advisors