Hawaii Mortgage Market Update – February 2026

Each month, we bring you insights from one of the best in the business — Zack Diener of Barrett Financial Group, LLC — to help you stay informed and make confident, well-timed decisions in today’s ever-changing mortgage landscape.

A Tale of Two Reports: Jobs and Inflation Send Mixed Signals

February delivered a fascinating week of economic data that painted a complex picture of where the U.S. economy stands. Within 48 hours, we received a surprisingly strong jobs report followed by an encouraging inflation report — a combination that typically shouldn’t happen together. The result? Mortgage rates near 3-year lows as markets digest what these conflicting signals mean for the Fed’s next moves.

Current Rate Environment: Back at Multi-Year Lows

As of today, mortgage rates are averaging 6.04% for conventional 30-year fixed loans according to Mortgage News Daily’s daily survey of lenders. After the January CPI report came in better than expected on Friday, rates dropped back to levels we haven’t seen since early January when the $200 billion bond-buying program was announced.

We’re now “oh so close” to the 3-year lows we touched in early January. The past two days of improvements have brought the average lender back to levels close enough to those long-term lows seen on January 9th and 12th. This represents a remarkable turnaround considering rates had bounced up to 6.34% just two weeks ago following the Fed’s last announcement.

The Jobs Report That Defied Expectations

On Wednesday, February 11th, the January jobs report shocked markets with its strength. The economy added 130,000 jobs versus expectations of just 75,000 — nearly double the forecast. The unemployment rate ticked down to 4.3% from 4.4% in December.

But here’s where it gets interesting: this positive report came with massive caveats that tell a sobering story about 2025’s labor market. Annual benchmark revisions revealed that there were 898,000 fewer jobs added between April 2024 and March 2025 than initially reported. On a non-seasonally adjusted basis, the downward revision was 862,000 – the second-largest negative adjustment on record behind only the 902,000 revision during the 2009 recession.

The full-year 2025 data was revised down by 403,000 jobs, bringing last year’s total job creation to just 181,000 for the entire year – an average of only 15,000 jobs per month. That’s the weakest annual job growth since 2003 outside of recession years.

What Caused Such Weak Job Growth?

Several factors contributed to 2025’s labor market weakness:

• Aging baby boomers retiring at an accelerated rate
• Federal government employment shrinking by 324,000 jobs since January 2025
• Immigration policy changes limiting workforce growth
• Employers hitting pause amid economic uncertainty and tariff concerns

Despite January’s strong showing, economists caution against declaring victory. The labor market hasn’t dramatically shifted in one month. Employment gains remain heavily concentrated in health care, wage gains have softened, and there are far fewer job postings than unemployed people looking for work.

The Inflation Report That Surprised to the Downside

Just one day after the strong jobs report – which would normally send rates higher – the January CPI inflation report delivered welcome news. Consumer prices rose just 2.4% annually, down from 2.7% in December and below the expected 2.5%. Core inflation (excluding food and energy) came in at 2.5% annually – the lowest level since April 2021.

Monthly, headline CPI rose just 0.2% versus the expected 0.3%, helped by:

• Gasoline prices down 7.5% annually (down 3% monthly)
• Food inflation moderating to 2.9% annually
• Shelter costs rising just 0.2% monthly, bringing annual increases down to 3%

However, not everything was rosy. Some categories remain stubbornly elevated:

• Utility gas service up 10% annually
• Beef and coffee prices up 15-18% due to supply constraints
• Homeowners and renters insurance up 7% due to climate risk
• Airfares jumped 6.5% in January

Economists note that the data may look slightly better than reality due to quirks from the government shutdown. Estimates filled in data gaps during the October shutdown, which could be making shelter inflation appear cooler than it actually is.

The Market’s Unusual Reaction

Here’s what makes this week so fascinating: just one day after an incredibly strong jobs report – something that would normally create problematic upward momentum for rates – the average lender dropped back to the lowest levels since January 16th. As Mortgage News Daily noted, “this was not on many experts’ bingo cards.”

The counterintuitive move likely reflects complex dynamics in Treasury markets, where investor demand has been flowing between different maturity bonds (2-year vs. 10-year). More importantly, it suggests markets are giving more weight to the concerning 2025 revisions and the inflation improvement than to January’s single strong employment report.

What the Fed Is Thinking

The combination of data creates a challenging environment for the Federal Reserve. They’re being pulled in two directions:

• Weak labor market conditions (2025 revisions, federal job losses) call for rate cuts
• Persistent inflation above their 2% target argues for patience

Most economists expect the Fed to remain on hold until June after the three rate cuts in late 2025. The central bank faces a rotating cast of regional presidents this year that tilts toward a more hawkish stance on inflation, making aggressive cuts less likely.

Fed Chair Jerome Powell’s term expires in May 2026, adding another variable. The new chair selection and potential policy shifts could influence rate decisions in the second half of the year.

Local Hawaii Market Update

The Hawaii real estate market is showing encouraging signs as we move into 2026. On Oahu, the market has built on the momentum from the second half of 2025, when single-family home sales rose 16% and condo sales climbed 9% compared to the first half of the year.

For November 2025, single-family home sales surged 17% year-over-year while the median price held steady at $1,112,500 (up 1% from the previous year). Condo sales were down 8%, with median prices falling 9% to $478,500, reflecting the typical seasonal trends and ongoing affordability challenges in the condo market.

Looking ahead, Locations Hawaii Chief Sales Officer Chad Takesue notes: “We expect to see moderate growth in the Oahu real estate market next year, if trends continue. While the familiar challenges of affordability and economic uncertainty remain, demand continues to outpace the limited supply of available housing.”

The improved rate environment is already making a difference. With the average 30-year mortgage rate recently falling to the low 6% range, local mortgage lenders are noticing more tangible homebuyer optimism in the market. The combination of rates near 3-year lows and steady inventory gives buyers more selection and negotiating power than they’ve had in years.

Here in Hawaii, local banks and Hawaii-based credit unions are reflecting these improved national rate trends. The expertise local lenders bring to island real estate transactions – understanding leasehold properties, rural financing, and Hawaii-specific nuances – becomes especially valuable when rate opportunities like this present themselves.

As a local mortgage brokerage with longstanding partnerships with both local and mainland institutions, I’m positioned to help clients take advantage of these favorable rate windows. With rates at 6.04%, we’re in territory we haven’t seen since late 2022.

What This Means for Borrowers

The Opportunity: We’re experiencing rates at or very near 3-year lows. Whether you’re purchasing or refinancing, current conditions represent some of the best we’ve seen since the Fed’s aggressive rate hiking campaign began in 2022.

The Volatility Factor: This week demonstrated how quickly rates can move based on economic data. We went from 6.34% two weeks ago back down to 6.04% today – a 30 basis point swing in just 14 days. This volatility cuts both ways and reinforces why timing the perfect moment is nearly impossible.

The Fed Path: With mixed economic signals, the Fed is likely to move cautiously. Don’t expect aggressive rate cuts that would push mortgage rates dramatically lower. The current environment may be as good as it gets for 2026’s first half.

The Economic Reality: The labor market is cooling significantly, which paradoxically supports lower rates even as single-month reports show strength. The 2025 revisions revealed genuine weakness that the Fed can’t ignore, even with January’s positive headline number.

Action Items:

• If you’ve been waiting for rates to improve, we’re at or near the best levels in 3+ years
• Don’t wait for rates to hit 5% – that’s unlikely given persistent inflation
• Lock rates when they’re favorable rather than gambling on further improvements
• Understand that economic data releases will continue creating volatility
• Focus on your readiness rather than trying to time the perfect moment

Looking Ahead

The next major catalyst will be the February jobs report, due March 6th. Markets will be watching to see if January’s strength continues or if we revert to the weak trend that characterized 2025.

The mortgage market has demonstrated once again that windows of opportunity can be fleeting. The early January lows were driven by a policy intervention. These mid-February lows are being driven by genuine economic data showing both labor market weakness and inflation improvement – arguably a more sustainable foundation for rate stability.

For borrowers ready to act, the current environment represents an exceptional opportunity compared to where we’ve been for most of the past two years. While we can’t predict if rates will drop further or bounce back up, we know that current levels around 6% are dramatically better than the 7%+ rates that characterized much of 2024 and early 2025.

The complex economic picture – weak labor market fundamentals masked by occasional strong reports, coupled with gradually improving inflation – suggests that rate volatility will continue. Those who can act decisively when opportunities present themselves will likely fare better than those waiting for perfect conditions that may never arrive.

Mortgage insights provided by Zack Diener, Barrett Financial Group

Zack Diener
Senior Loan Advisor
Mortgage Loan Originator | NMLS 470413
Based in Fort Collins, CO
Serving Colorado and Hawaii
(808) 349-3777 phone
(800) 385-3630 fax
ZDiener@barrettfinancial.com

Barrett Financial Group, LLC | Corp NMLS #181106
275 E Rivulon Blvd, Suite 200, Gilbert, AZ 85297