Housing Market Update | Week of August 11th

Rates barely budged last week thanks to a lack of new economic data. Still, mortgage rates are the lowest they’ve been all year. These lower rates gave housing demand a lift, with purchase application data increasing week-over-week and inventory dipping slightly. This week’s big story is Tuesday’s CPI inflation report, which could push rates up or down depending on the results. As always, labor data holds more weight than inflation in terms of mortgage rate movements, so Thursday’s Initial Jobless Claims report could give us clues on how soon the Fed might act. Last Week's Mortgage Rate Recap Rates Were Steady Last week was quiet in terms of new economic data, and mortgage rates remained steady. The most newsworthy event is the ongoing changes at the Federal Reserve following Fed Governor Adriana Kugler’s resignation on Friday. President Trump said Stephen Miran, the former Chair of the Council of Economic Advisors, would take her place. Miran has publicly favored rate cuts, and his view is becoming more common after Fed Governor Michelle Bowman recommended three rate cuts in 2025 over the weekend. This is, of course, dependent on labor and inflation data. In terms of housing data, lower rates helped increase housing demand with 2% week-over-week growth and 18% year-over-year growth for purchase applications. Single-family inventory—which reached a new five-year high on August 1st—ticked slightly lower, likely due to this increase in demand. Inventory is still up 24% year over year, which bodes well for a healthy market with an influx of demand as rates continue to drop. This Week's Mortgage Rate Forecast Rates Could Move Slightly It’s inflation week this week, with our CPI and PPI inflation reports slated to drop on Tuesday and Thursday, respectively. CPI will hold the most weight for mortgage rate movements this week. Economists currently expect the reading to be between 0.16% and 0.2%, which is a relatively tame reading. These readings will give us some key insights into how the bond market will react to either higher or lower inflation data. While this inflation data could move the market, the labor market remains the most influential in determining whether the Fed cuts rates this year. This was reinforced in Bowman’s comments regarding three rate cuts over the weekend. She highlighted the revised job growth data, which showed a significant slowdown in hiring, and argued that waiting too long to act could cause unnecessary market volatility. Because of this, we’ll want to keep watching Thursday’s Initial Jobless Claims report, which shows the number of individuals filing for unemployment for the first time. Last week, jobless claims ticked higher, but the overall figure remains relatively low. The market is constantly changing, so if you have any questions regarding rates or specific products for any of your buyers, make sure to stay in touch with your UMortgage Loan Originator for timely updates and expert insight!

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.