September 29, 2025 – Despite ongoing challenges in the labor and housing markets, recent data offers reasons for guarded optimism. New home sales have surged to multi-year highs, buoyed by lower mortgage rates and builder incentives, while inflation remains contained enough to reassure policymakers. Although jobless claims have dropped and builder sales expectations are improving, persistent concerns about unemployment and construction costs suggest that the recovery, while promising, still faces headwinds. Overall, the outlook is brighter, but caution remains warranted as uncertainties linger.

New home sales soar unexpectedly to a three-year high: In August 2025, U.S. new home sales surged to the highest level in more than three and a half years, climbing up 20.5% to a seasonally adjusted annualized rate of 800k units and jumped 15.4% on a year-over-year basis. The increase from July exceeded economists’ expectations, and it was the largest gain since August 2022. Modest decline in mortgage rates and heavy builder incentives/discounts were the reasons for the leap in sales. New home sales saw the sharpest monthly surge in the Northeast (+72.2%), followed by the South (+24.7%), the Midwest (+12.7%), and the West (+5.6%). Compared to the year-ago level, new home sales in the West region remained below last year by 5.7%, while the other three regions were up by at least 20%. Strong sales took housing inventory down to a 7.4-month supply with unseasonally adjusted for sale units dropping to 490k units, the lowest level since last December.

Builder confidence remains low, but sales expectations hit six-month high: The NAHB/Wells Fargo Housing Market Index, a monthly measure of home builder confidence in the single-family housing market, stalled in September and continued to hold a score of 32, the same as the prior month. It was a decline from 41 in September 2024 and was the lowest index since April 2020. To help boost housing demand last month, the latest survey results showed that 39% of builders cut prices in September, the highest level in the post-Covid period. Nearly two-thirds (65%) of homebuilders used sales incentives last month, virtually the same as the prior month (66%). Lower mortgage rates and expectations of the Federal Reserve having more cuts before the end of the year, however, should help boost builder sentiment in coming months. In fact, sales expectations in the next six months rose two points to 45 and reached the highest level since March. While builders remain concerned about the slowdown in housing demand and the surge in construction costs, recent declines in mortgage rates and further rate-cut expectations offer them hopes of a brighter outlook in the near term.

Jobless claims drop to lowest level since mid-July: U.S. initial jobless claims dropped by 14k to a seasonally adjusted 218k for the week ending September 20, reaching a level well-below the 235k forecasted by the Dow Jones consensus. While the decline suggests layoffs are easing, there are signs of strains in the labor market as unemployment rate inched up to 4.3% in August, the highest level in nearly four years. Nonfarm payroll growth continued to slow in recent months, and the number of job openings hit at multi-year low as many employers put their hirings on hold. Meanwhile, continuing unemployment claims fell for the week ending September 13th by 2k to 1.926 million, a level below the recent high of 1.964 million reached in mid-June but above the same week in 2024 by over 5%. At the state level, initial filings for unemployment benefits rose from the prior week in California, with new jobless claims climbing to 37,689 from 35,975 the week before. Continuing claims in the state also rose 11,348 to 358,474 for the week ending September 13th but were virtually unchanged from the same week a year ago. With the U.S. jobless claims falling to the lowest level since mid-July, concerns over labor market ease slightly but fears of the nation’s employment outlook will remain in coming months as policy uncertainty lingers on.

REALTORS® are embracing artificial intelligence: REALTORS® adapt quickly to technological change, and many are doing so to save time and to enhance their client experience. Artificial intelligence (AI) is the latest technology that more agents are leaning into it. According to NAR’s 2025 Technology Survey, 41% of REALTORS® are currently using AI or Generative AI as a tool. While one-third (32%) have not actively used AI for their business, 20% of agents have been using AI in their business daily, 22% weekly, and 27% a few times a month. Half of the REALTORS® found that the impact of AI on their business was either significantly positive (17%) or moderately positive (33%). The top AI tools used by REALTORS® include ChatGPT (58%), Gemini (20%), Copilot (15%), Apple Intelligence (8%), and Grok (5%). With digital tools constantly reshaping the way real estate is being practiced today, REALTORS will continue to embrace new technology to streamline operations and strengthen their market positioning.

U.S. inflation picked up slightly in August but not enough to alarm the Fed: The personal consumption expenditure price index (PCE) – the Fed’s favorite inflation indicator – increased 0.3% on a month-over-month basis in August and was up 2.7% from a year ago, according to the Department of Commerce. Excluding food and energy, the core PCE recorded a 2.9% year-over-year increase and was unchanged from July’s annual inflation rate. The slight increase in overall prices suggests that inflation remained contained and provides some reassurance to the Fed that the shift in balance in favor of labor market risk is indeed the right move for now. The second consecutive month of a 0.3% monthly increase in the cost of services, however, is an indication that higher inflation could remain an issue in the short term.

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