Is There a Bad Moon Rising?

Over the past several weeks, I’ve shared my view that the U.S. economy is quietly slowing — to the point where more people may begin using the “R” word (recession) in normal conversation.

Not because we’ve seen some dramatic economic collapse — but because of the slow, real-world indicators that consumers notice first:

• Store closures
• Restaurant pullbacks
• More visible shifts in spending habits
• And most recently, confirmation from the latest Retail Sales report, which showed a decline over the holiday season

Now, on the surface, recession talk makes people nervous. But here’s the inconvenient truth:

A modest slowdown — if managed correctly — may actually be constructive for both mortgage rates and housing activity.

A slowing economy reduces demand pressure, which helps bring inflation down. That gives the Federal Reserve additional justification — and political cover — to move toward rate cuts.

We’re already seeing some of that disinflation momentum show up in the most visible place possible: gas prices. Falling gasoline costs help ease inflation expectations and provide relief to consumer budgets, even before broader economic indicators fully reflect it.

Meanwhile, the bond market has started to reflect this shifting macro view.

Despite better-than-expected unemployment data, markets appear increasingly focused on the accumulation of broader slowdown signals. As a result, the 10-year Treasury yield has moved back below the 4.25% threshold, drifting closer to the 4.15% range — a meaningful move that translates directly into downward pressure on mortgage rates.

So, is a slowing economy really that bad?

Not necessarily.

The best-case scenario is a “soft landing,” where inflation cools without triggering widespread job losses. Historically, achieving that outcome has been extremely rare — the Federal Reserve doesn’t exactly have a perfect track record here.

But perhaps this time, the policy mix has been calibrated just well enough to reduce inflation, stabilize employment, and bring overall rates down gradually — setting the stage for the next sustainable expansion.

Because in economics — much like in housing — nothing rises forever.

Trees do not grow to the sky.
And neither does economic growth.

The key is whether we can navigate the slowdown without turning it into something worse.