As the U.S. housing market heads into the final quarter of 2025, a complex mix of economic forces and local policy debates is shaping the real estate landscape for buyers, sellers, and communities alike. From California’s shifting labor force to Cape Cod’s innovative proposals for affordable housing, and with mortgage rates remaining in focus nationwide, the next six months promise both challenges and opportunities for those navigating the world of homeownership and real estate investment.
Labor Force and Housing in California: The Foundation of Real Estate
California’s labor force participation (LFP) rate—an indicator that includes both the employed and those actively seeking work—remains a crucial gauge for the state’s real estate activity. As reported by firsttuesday Journal, jobs are the engine that drives housing demand: employed consumers rent and buy homes, while their employers lease or purchase commercial spaces. The LFP rate, which peaked at 67% in 2000, has been on a downward trend, influenced by an aging population and economic shocks like the recessions of 2009 and 2020. By June 2025, both California and the national average LFP rates converged at about 62%.
While California’s population has seen cyclical declines during downturns, the number of employed individuals is the statistic that truly matters for real estate. After reaching a pre-pandemic high of 17.7 million employed in December 2019, employment grew to an all-time high of 18.2 million in December 2024. However, by June 2025, employment had dipped slightly to 18.1 million, and the trend is downward. This matters because, as the publication notes, “a paycheck is the primary financial base for an individual’s ability to qualify to lease a residence or obtain mortgage funds to buy a home.”
Fewer jobs mean fewer leases signed and slower home sales, especially in the lower- and middle-income brackets. Areas with higher LFP rates see more real estate transactions, while sustained dips contribute to reduced activity and brokerage income. For agents and brokers, tracking these employment trends is essential for forecasting business conditions and identifying regions more likely to generate sales and fees.
Cape Cod’s Bold Proposal: Luxury Transfer Fees for Affordable Housing
On the opposite coast, Cape Cod is grappling with its own housing crisis—and exploring creative solutions. At a special hearing on September 24, 2025, the Barnstable County Assembly of Delegates discussed a proposed fee on high-priced real estate sales to fund affordable housing, according to Cape Cod Times. The proposal would allow individual towns to opt in or out and set their own rates—ranging from about 0.5% to 4%—with the fee paid by buyers of luxury properties. If implemented, the measure could generate between $14 and $16 million annually for housing programs.
The Assembly’s move follows an official declaration of a housing crisis in April 2025. As Yarmouth Assembly Delegate Susan Warner put it, “We must find a way to bring in a revenue stream in order to move a lot of ideas for housing.” Local control is central to the proposal, with each town deciding through its own governance whether to participate and at what rate. Chatham Delegate and Speaker Randi Potash emphasized this point, saying, “Local control is central.”
Paul Niedzwiecki, CEO of the Cape Cod Chamber of Commerce, acknowledged the measure’s potential, stating, “This is not the kind of money that will directly build large volumes of new housing on its own … What matters most is how these funds are deployed and that’s why we support a regional approach.” He suggested that pooling resources at the county level could enable transformative projects, such as deed restriction programs to keep homes affordable for working families. With 37% of Cape Cod’s housing stock as second homes and 12% used for short-term rentals, Niedzwiecki argued that the crisis is as much about occupancy as it is about supply: “By strategically buying properties into deed restrictions, we can keep more homes in the hands of working families faster than we can build entirely new units.”
Still, some local leaders, like Andrew Gottlieb of the Association to Preserve Cape Cod, expressed concerns about the lack of specifics and called for clear boundaries on how funds would be allocated. “To put it bluntly, we would want to see any such transfer tax authority be expressly limited to supporting housing in those areas that we determined collectively are most appropriate for dense housing,” Gottlieb said. The debate is set to continue as a subcommittee drafts a home rule petition and ordinance for further consideration later this fall.
Mortgage Rates: A Delicate Balance Heading Into 2026
Meanwhile, for buyers and homeowners nationwide, mortgage rates remain a central concern. As of late September 2025, the average 30-year fixed mortgage rate sits around 6.3%, according to Freddie Mac data cited by Norada Real Estate Investments. This is down from a high of 7.04% earlier in the year, thanks in part to a Federal Reserve rate cut in September and expectations of further cuts by mid-2026.
Looking ahead, most experts predict rates will remain in the mid-6% range from October 2025 through March 2026, possibly easing to 6.2% to 6.5% as 2026 begins. Inflation, unemployment, and GDP growth are the key variables: inflation may peak at 3.1% in mid-2026, unemployment could rise to 4.5%-4.8%, and GDP growth is forecasted between 1.7% and 2.3%.
For buyers, these rates present ongoing affordability challenges. A 6.4% rate on a $400,000 loan means monthly principal and interest payments of about $2,500, not including taxes and insurance. Yet, compared to the volatility of previous years, the current environment is more stable, with refinancing activity up 42% year-over-year. If rates dip below 6.5%, more homeowners may be tempted to sell, potentially easing tight inventory and supporting a gradual recovery in home sales—from an expected 4.85 million units in 2025 to 5.35 million in 2026.
Expert forecasts align around the mid-6% mark, with slight differences depending on assumptions about inflation and Federal Reserve policy. Fannie Mae, the Mortgage Bankers Association, and Freddie Mac all see rates hovering between 6.2% and 6.4% through early 2026, while the National Association of REALTORS® is a bit more optimistic, suggesting rates could approach 6.0%.
Yet, the outlook remains sensitive to surprises. A faster-than-expected drop in inflation could see rates fall below 6.0%, while stubborn inflation or global shocks could push them higher. As one industry observer put it, “The economy always has a few surprises up its sleeve.”
What It All Means for Real Estate and Communities
Across the country, the interplay of employment, policy innovation, and interest rates is shaping a housing market that’s slowly regaining its footing. In California, job trends will continue to dictate the pace of real estate activity, while in places like Cape Cod, local governments are experimenting with new funding streams to address affordability. For buyers and sellers, mortgage rates remain the key variable—steady for now, but always subject to the winds of economic change.
As we move into 2026, the story of American real estate remains one of adaptation and resilience, with each region searching for the right balance between opportunity and stability.
