Housing Market Update | Week of June 30th

After holding steady for nearly the entire month of June, mortgage rates finally dropped last week. This slow downward trend was driven mainly by headlines from Fed Governors suggesting that it could be time for a rate cut, as well as President Trump stating his intention to pick Jerome Powell’s successor as Federal Reserve Chairman. There’s been a lot of pressure on the Fed to cut rates from outside voices, and this week could ramp up that pressure with the right data. We have a short week ahead with the Fourth of July this Friday, but no shortage of data that could shift mortgage rates this week. It’s the last jobs week before the July 30th Fed Meeting, and if we want to see a rate cut in July, this week’s reports will need to show significant weakness in the labor market. Bad labor data this week would only increase pressure on the Fed to cut rates. With markets closed on Friday and some big data coming Thursday morning, let’s connect early in the week to make sure our clients don’t get caught in any market volatility. Last Week's Mortgage Rate Recap Rates Dropped Mortgage rates finally dropped last week, but not because of Friday’s PCE inflation report. On Wednesday night, President Trump announced that he is considering nominating his pick to succeed Fed Chair Powell 11 months before Powell’s term ends. This move would undermine Powell and increase pressure on the Fed to cut rates. This caused the 10-year yield to dip, driving mortgage rates slightly lower. This dip came to a halt on Friday morning as the PCE report, the Fed’s preferred measure of inflation, showed that headline inflation rose 1% in May and 2.3% year-over-year. This was right in line with market estimates and prevented bonds from continuing to drop into the weekend. This Week's Mortgage Rate Forecast Rates Could Be Volatile This week is jobs week, with four major labor reports coming between Tuesday and Thursday. Continuing jobless claims, which record the number of people who have filed for and are currently receiving unemployment benefits, hit a 3-year high last week. This means that unemployed individuals are having a harder time finding a new job, which could hint at increasing weakness in the labor market. Here’s what’s coming this week: Tuesday: Job Openings, Losses, and Turnover Survey (JOLTS) Wednesday: ADP Employment Report Thursday: Bureau of Labor Statistics (BLS) Jobs Report, Initial Jobless Claims The markets expect 120,000 jobs created in the ADP report and 115,000 in the BLS report, as well as an increase in the unemployment rate to 4.3%. All signs point to a labor market that continues to weaken, but will this week’s data be weak enough to prompt the Fed to act this month? If we see weak labor data this week, the table is set for lower mortgage rates. Typically, markets tend to overreact when a report like the BLS report is released the day before a 3-day weekend. While we might see rates drop, make sure to make sure to stay in touch with your UMortgage Loan Originator so your clients don’t get caught in any potential market volatility as they enjoy their July 4th festivities.

If you’ve been watching the news lately, you’ve probably seen a lot of headlines about the Federal Reserve and interest rates. And if you're a homebuyer or a real estate agent working with buyers, you might wonder: Does the Federal Reserve control mortgage rates? It’s a great question. And the short answer is: Not necessarily. The longer answer is a bit more nuanced because while the Fed does play an important role in the economy, it doesn't directly control mortgage rates. What Is the Federal Reserve and the Federal Funds Rate? The Federal Reserve—often referred to simply as the Fed—is the central bank of the United States. Its primary job is to keep the economy healthy by keeping inflation in check, supporting the labor economy, and promoting stable & sustainable economic growth. One of the main tools the Fed uses to manage the economy is the Federal Funds Rate. This is the interest rate banks charge one another for overnight loans. While consumers don’t pay this rate directly, it has a ripple effect across the economy, influencing rates on credit cards, auto loans, and savings accounts. How the Federal Funds Rate Influences the Economy When the Fed raises the Federal Funds Rate, it becomes more expensive for banks to borrow money. That tends to result in higher borrowing costs for consumers and businesses in an attempt to slow down inflation and prevent the economy from overheating. When the Fed lowers the rate, borrowing becomes cheaper. This encourages more spending and investment, often a strategy used during economic slowdowns or recessions. Important distinction: The Federal Funds Rate influences the economy, but it does not directly control mortgage rates. Why Mortgage Rates Don’t Always Follow the Fed Here’s where a lot of confusion begins. Many people assume that when the Fed raises interest rates, mortgage rates automatically rise too. But that’s not how it works. Mortgage rates are driven by a different set of economic factors, mainly the bond market. Specifically, rates are closely tied to the 10-year Treasury yield and the performance of mortgage-backed securities (MBS). Investors who buy these securities care most about the labor market, inflation, the long-term economic outlook, and market stability/instability If inflation is rising or expected to rise, mortgage rates tend to increase. If economic conditions appear weak or uncertain, rates can fall, even if the Fed is raising the Federal Funds Rate. In fact, mortgage rates often move in anticipation of what the Fed might do, not just in response to what it has done. The markets are always looking ahead. What Really Drives Mortgage Rates? Here’s a quick snapshot of the major factors that impact mortgage rates: Inflation: Higher inflation usually = higher mortgage rates. Economic Growth: A strong economy can lead to higher rates. Global Events: Uncertainty (like geopolitical conflict or pandemics) can drive rates lower. Bond Market Demand: More demand for mortgage bonds often = lower mortgage rates. In other words, mortgage rates are influenced by a wide range of factors and are always forward-looking. Want more in-depth analysis of the housing market? Check out our weekly Housing Market Update blog. How Homebuyers and Real Estate Can Navigate the Market For homebuyers and the real estate agents supporting them, the key takeaway is this: Don’t assume that a Fed rate cut means mortgage rates are going down. In some cases, mortgage rates don’t move much on the day that the Fed cuts rates. Most of the time, they will drop in the lead-up to a Fed Meeting if a rate cut is expected. Other times, they might drop after a Fed announcement, depending on how markets interpret the economic outlook. If you’re considering buying a home or are an agent for a hesitant buyer, here’s how you should navigate periods of market instability: Focus on personal goals and timing, rather than trying to time the market. Work with a knowledgeable mortgage professional who can explain how market shifts impact your unique situation. Make informed decisions based on the bigger picture, not just headlines. Whether you're buying, selling, or considering a refinance, UMortgage Loan Originators are here to help you navigate the market with confidence and leverage homeownership to build wealth. If you’re curious about your homebuying or refinance options and want expert guidance, fill out this form to get connected with a UMortgage Loan Originator in your area!

Last week was a wild one for mortgage rates. Although the Federal Reserve announced that they would not be cutting the Federal Funds rate in their May meeting, they did announce that they are tapering their balance sheet reduction. This, combined with weak labor data sprinkled at the end of the week, saw mortgage rates drop at the end of the week. Last Week's Rate Recap: Rates Dropped Slightly Last week, the Federal Reserve held its May meeting. While they decided against cutting rates, Jerome Powell, Fed Chairman, held a dovish stance on the possibility of rate cuts in the future. Last week’s labor reports also showed a softening in the jobs market which caused rates to drop quickly at the end of the week. While it’s still unlikely that we see a rate cut in the Fed’s next meeting, a weakened labor market will be the key to seeing rates drop as the year goes on. This Week's Rate Forecast: Rates Should Stay Steady After the flurry of data and insight from last week’s jobs reports and the Federal Reserve meeting, we have a quieter week ahead without much data for the market to digest. Following a steep drop to the 10-year yield at the end of the week, market analysts will have a careful approach to instill some stability throughout the week. Overall, we should expect to see some steadiness throughout the week. If you want a more comprehensive overview of the market’s reaction to the Federal Reserve meeting and labor data last week, check out a replay of today’s Special-Edition Monday Market Update. Our two hosts offered plenty of insight behind these rate movements and some tactical advice to help you use these pieces of market data to better serve our homebuyers.