Weekend Talking Points - 'Debate'

ADP’s June jobs data suggested a weakening labor market, but the BLS data showed the opposite. This ‘debate’ isn’t just hypothetical. One suggests that the Fed should be moving to loosen policy; the other provides justification for a wait-and-see approach.

The great jobs debate. Who’s right
ADP: Private employers shed jobs in June. After very weak jobs growth in May (+37,000), Wall Street economists were expecting a rebound in June (~100,000 estimated). Instead, ADP reported that private employers DROPPED a net 33,000 jobs! [ADP]

TP: This was a shocking report. Breaking the job losses down further, the services sector actually lost 66,000 jobs, and small and medium-sized companies lost 62,000 jobs.

BLS: We’ve got a different view. In stark contrast to the ADP report, the Bureau of Labor Statistics reported that the US economy GAINED a net 147,000 jobs in June and the unemployment rate declined to 4.1% (from 4.2%). [BLS]

TP: As always, the BLS report included a number of eyebrow-raising elements: the decline in the labor force (which flattered the unemployment rate), half of the 147K job gains came from government posts (mostly at the state and level), and huge seasonal adjustments that turned real government job losses into apparent job gains.

A Big Beautiful Bill for real estate. The National Association of Realtors sounded positively giddy about the ‘big wins’ for homeowners included in Trump’s “One Big Beautiful Bill”, which became law on July 4. [More on this later.]

Recovery in housing sentiment faces setbacks. Fannie Mae’s Home Purchase Sentiment (“HPSI”) index tracks consumer attitudes towards the housing market and the overall economy. For most of 2023 and 2024, the index was trending higher as mortgage rates moved lower (and buyer sentiment improved). But in 2025, the index has moved lower on economic concerns (tariffs etc.) and lately, increased job insecurity. [Fannie Mae]

TP: In June 2025, only 28% of respondents thought it was a “Good Time to Buy”. Pretty low, right? But in June 2022 (as the Fed began its aggressive rate hikes), that figure was 17%.

Inventory growing; listing prices flattish. In June 2025, nationwide active inventory (which excludes homes already under contract) rose 5% month-over-month (+29% year-over-year) to 1.08 million units, the highest figure since November 2019 (just before the onset of COVID-19). Nationwide median listing prices were basically flat at 0.2% YoY. [Realtor.com]

TP: If you didn’t see last week’s Talking Points, make sure you check out ‘Legends of the Fall’, which looks in depth at inventory and listing price levels across the country.

Cotality sees slowing home price growth. (That’s the new name for CoreLogic.) Cotality said that home price growth had slowed to +1.8% YoY in May 2025, but it still forecasts more than 4% appreciation over the next 12 months.

TP: Like Case-Shiller and FHFA, the Cotality HPI uses a ‘repeat sales’ methodology, which more accurately captures true home price appreciation. Other measures — such as Realtor.com’s median listing price — can be (and is being) skewed by the mix of homes for sale, which are concentrated in the (relatively) cheaper South region (Florida, Texas etc.)

FHFA moves to increase credit access. The FHFA, headed by Bill Pulte (yes, from that Pulte family) just advised the GSEs (Fannie, Freddie etc.) to accept VantageScore 4.0 credit scores. This move is designed to increase competition (and therefore reduce the prices charged) for providing credit scores. Fair Isaac shares (that’s the “FI” in FICO) fell 9% on the day.

The One Big Beautiful Bill for Real Estate

Trump’s giant bill included a number of provisions that extended and/or permanently enshrined tax breaks for homeowners. The NAR, NAHB (National Association of Homebuilders), and MBA (Mortgage Bankers Association) all seemed to love it. Let’s take a look at the relevant provisions:

• Extension of the 2017 personal income tax rates. The highest rate will remain at 37%, with inflation adjustments (protecting more income from taxes) for the 10%, 12% and 22% brackets. The standard deduction was also permanently increased to $15,750 for single filers and $31,500 for joint filers.
• Permanent protection for mortgage interest deduction. This significant tax benefit for homeowners (especially in the early years of a mortgage), is now unassailable.
• Permanent protection for 1031 exchanges. These ‘like kind’ exchanges — used extensively by property investors — allow for the deferral of capital gains taxes on properties sold, as long as a home of equal or greater value is purchased within a few months of the sale date.
• A temporary (5-year) quadrupling of State and Local Tax (“SALT”) deductions. The previous SALT deduction was $10,000. Now most people will be able to use up to $40,000 of state and local taxes paid to reduce federal taxable income.
• Permanent protection for qualified business income deductions.

Mortgage Market

Just when the stars seemed to be aligning for lower mortgage rates (GDP revisions, weak ADP report etc.), the BLS report knocked everything out of orbit. A week earlier, a July 30 Fed rate cut at least seemed possible. Now, the market has ruled that out.

Here’s what the Fed Funds Rate futures market is currently pricing in for rate cuts. Note that the current Fed Funds Rate policy range is 4.25–4.50%.

• July 30 FOMC Meeting: 95% probability that the policy rate will remain at 4.25–4.50% (way up from 75% last week). The BLS jobs report basically put a stop to the rally in bond prices.
• September 17 FOMC Meeting: 63% probability that rates will be 25 bps below current (down from 73%). This implies a 25 bps rate cut at this meeting. 34% probability that rates will remain at 4.25–4.50%.
• October 29 FOMC Meeting: 39% probability that rates will be 50 bps below current (down from 53% last week).14% probability that rates will remain at 4.25–4.50%.

They Said It

“Across the country, the market has a split character. The Northeast and the Midwest are home to some of the hottest markets in the country while Texas, Hawaii, Florida, and the Washington D.C. area are posting negative home price growth of -0.5%, -0.7%, -1.3%, and -2.1%, respectively.

The variation in home price growth is largely driven by the availability of homes for sale. Many markets in the South and Desert West have seen strong rebounds in available inventory, and amid weaker demand, these markets are facing some downward pressure on home prices. At the same time, many of these same markets have grown relatively more unaffordable over the course of the last few years, with cumulative increases in home prices averaging 60% to 70%, compared to the overall national increase of 48% since spring of 2020.

As a result of overvaluation, and concerns around rising non-fixed costs like property taxes and insurance, those markets are now readjusting.” — Cotality June 2025 Home Price Insights