It’s already mid-August, meaning we’re well into the back half of 2026 and approaching the mid-term elections. Like any year, 2026 has brought a few surprises, most notably in financial markets regarding the Federal Reserve Target Rate expectations. To start the year, according to the CME FedWatch tool, there was a high probability of a rate cut by the September 16 meeting[1]. We haven’t seen that play out to date, and the data is currently showing a greater probability of an increase as we move toward 2027. While the Fed doesn’t set mortgage rates directly, its targets drive the bond market, which trickles down to the dinner table conversations about big purchases, particularly mortgages.
With many pre-2022 homebuyers holding mortgages of under four percent, it is difficult to justify moving anywhere, considering they would now be looking at a mortgage interest rate that is just about double. Home prices haven’t dropped to compensate for this, and housing costs, particularly for first-time homebuyers, are in the stratosphere. This mismatch in current vs. new mortgage rates may change generational wealth transfer in that more wealth may be locked into an illiquid property. In previous times, downsizing was a popular option for empty nesters, but now just more than 20% of baby boomers surveyed indicated that they are staying put because prices are too high[2]. With empty nesters choosing not to downsize, their home equity stays trapped, essentially pausing the ‘living inheritances’ they might have used to help their children enter the housing market. Because this delays wealth transfer until death, advisors are now forced to plan around more illiquid balance sheets.
On the other side of the coin, the rent vs. buy math is changing. Anecdotally, when I bought a condo in the Denver area in 2012, my mortgage, interest, taxes, and HOA combined were less than rent in a much smaller apartment. This wasn’t uncommon at the time. Now the math has flipped. Destigmatizing renting can lead to better financial outcomes for younger investors who are laser-focused on homeownership. A Realtor.com report concluded that renting a starter home is a more affordable choice than buying, with average monthly savings of $920 across all 50 metros in the report[3]. I don’t need to give a compound interest calculation example for you to understand how big that can be over time if invested for the future.
The constant press on the Federal Reserve and its interest rate targets isn’t only important to financial markets and asset valuations. These targets affect your clients at the kitchen table when they are figuring out future living expenses, goals, and wealth transfer to the next generation. These decisions are intertwined with their net worth, liquidity, and expenses. It is always good to keep a pulse on these macro discussions as they affect the micro more than it seems.
[1] https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
[2] https://nationalmortgageprofessional.com/news/growing-majority-baby-boomers-plan-age-place#:~:text=It%20found%20that%20empty%2Dnest%20baby%20boomers%20own,move%2C%20according%20to%20the%20same%20Redfin%20survey.
[3] https://www.realtor.com/research/march-2026-rent/#:~:text=In%20March%202026%2C%20the%20cost%20of%20buying,PA%2C%20to%20%242%2C425%20in%20San%20Jose%2C%20CA.
