If you’ve been following economic news, then you likely have seen the headlines that mortgage rates continue to climb. According to Freddie Mac’s most recent survey of average rates, published last week, the 30-year rate has risen to its highest level since 2001.
This precipitous climb over the past few weeks has come largely as a result of a few factors including: the US government seeking $275 billion in July to fund the government, which led to the downgrade of US debt due to “fiscal deterioration.” The market’s fears of recession have all but evaporated. Inflation remains elevated, and oil prices rising are evidence it’s not changing drastically anytime soon.
However, since last week’s Freddie Mac survey, rates have moderated somewhat. We also have some big economic news coming out this week, making it possibly one of the biggest economic news weeks of the year. The next Fed Meeting is a few weeks away, and there’s lots of inflation data coming out, as well as the monthly Jobs Report and important housing reports.
First up, the report on home price appreciation – the Case-Shiller Home Price Index and the FHFA House Price Index – came out on Tuesday. The FHFA House Price Index reported a year-over-year 3.1 percent rise in prices, whereas Case-Shiller’s Index reported a 1.2 percent pullback.
Pending Home Sales numbers, following an uptick by 0.3 percent in June, are expected to fall back by 0.4 percent for July.
On Thursday, the Fed’s favorite inflation indicator (PCE Index) comes out, which I imagine is going to attract lots of attention, especially as speculation grows about how long will the Fed keep raising rates and when will inflation finally be curbed to it’s 1-2 percent ideal range, as set by the Fed.
Inflation readings within the PCE Index for July are expected at monthly increases of 0.2 percent for the month. versus June’s increases of 0.2. Annual rates are expected at 3.3 percent overall, versus June’s 3.0. As long as inflation remains elevated, it’s likely mortgage rates will, too.
The week’s employment reports begin on Wednesday with the ADP report on private-sector job creation. Estimates are that we’ll see a 200,000 increase in job growth.
Friday’s Jobs Report is expected to report a moderating but still solid 170,000 rise in job growth in August versus 187,000 in July, which was a bit lower than expected. Average hourly earnings in August are expected to rise 0.3 percent on the month for a year-over-year rate of 4.4 percent; these would compare with 0.4 and 4.4 percent in the prior two reports, meaning that wage inflation continues to persist as well. August’s unemployment rate is expected to hold unchanged at 3.5 percent.
We may see some volatility in the markets and mortgage rates this week, depending on how the data comes out. I’ll be keeping an eye on it all and report back.
I wish you a safe and happy Labor Day Weekend as we mark the close of the summer season!
