Fed Holds Rates Steady as Housing Prices Find Support

[Derek Brickley]

Week of January 26, 2026 in Review

The Fed hit pause at its first meeting of the year, President Trump named his pick for the next Federal Reserve chair, and new housing data showed buyer demand continues to prop up home prices.

Here’s what matters and why it’s relevant right now.

Trump Names Kevin Warsh as Next Fed Chair Pick

President Trump announced plans to nominate Kevin Warsh as the next chair of the Federal Reserve, set to replace Jerome Powell when his term expires in May.

Warsh previously served on the Fed’s Board of Governors from 2006–2011 and has long been vocal about inflation risks. While historically considered an inflation hawk, he has more recently argued that the Fed should move faster to cut rates.

Why this matters: Leadership at the Fed shapes long-term policy direction. While Powell remains in charge for now, markets will increasingly price expectations based on how they believe a future Fed chair might approach inflation, employment, and interest rates.

Fed Pauses Rate Cuts But Division Remains

As expected, the Federal Reserve held the Federal Funds Rate steady at 3.50%–3.75%, following three quarter-point cuts late last year.

The decision was not unanimous. Governors Stephen Miran and Christopher Waller dissented, favoring another cut — highlighting continued disagreement inside the Fed.

Notably, the Fed removed language suggesting “downside risks to employment” had increased. Waller strongly disagreed with that change, warning that labor-market deterioration remains a real risk.

What’s the bottom line? The Fed is trying to balance two opposing forces:

• Inflation that’s still above target
• A labor market showing signs of cooling

Markets currently expect rates to remain on hold for the next couple of meetings — but that outlook could shift quickly if jobs or inflation data weakens further.

Buyer Demand Is Supporting Home Prices

Home price data showed quiet strength, especially after seasonal adjustments.

• Case-Shiller prices rose 0.4% month-over-month (seasonally adjusted)
• National prices remain 1.4% higher year-over-year
• FHFA prices climbed 0.6% month-over-month and 1.9% annually

What’s the bottom line? As mortgage rates eased late last year, buyer demand improved — and that demand is helping stabilize prices.

At the same time, builders can’t quickly add supply. New homes must move through permitting, construction, and completion before hitting the market. If rates continue drifting lower, limited inventory could once again put upward pressure on prices.

Labor & Inflation Updates (Still Mixed)

• Initial jobless claims fell slightly to 209,000
• Continuing claims dropped to 1.83 million, though still elevated
• December Producer Prices rose 0.5% month-over-month, hotter than expected
• Most price pressure came from machinery and equipment margins — not broad inflation

What’s the bottom line? Layoffs remain limited, but hiring is cautious. Inflation pressures exist, but they’re concentrated rather than widespread — giving the Fed room to stay patient.

What This Means Right Now

• Rate cuts are paused, not off the table
• Buyer demand is quietly improving
• Inventory remains the biggest constraint
• Pricing power still exists in well-positioned homes

For buyers and sellers, strategy matters more than headlines.

What to Watch This Week

• Job openings (Tuesday)
• ADP private payrolls (Wednesday)
• Jobless claims (Thursday)
• Full jobs report (Friday)

Note: Data timing could shift depending on government funding decisions.

Quick Rate Watch

Mortgage bonds are holding key support levels, while the 10-year Treasury sits just above an important long-term average. If inflation stays contained, rate conditions could improve modestly in the weeks ahead.