A normally innocuous event last week sent mortgage rates higher. The opening line of the Fed’s Meeting Minutes, “uncertainty of the U.S. economic outlook remains elevated…” confirmed for traders that we still don’t have certainty about the direction of inflation. Uncertainty and inflation are two of the arch enemy’s of mortgage rates, and when they are high, mortgage rates will rise, and that’s exactly what happened last week, according to Freddie Mac’s weekly survey of average mortgage rates.
Interestingly, Sam Khater, chief economist at Freddie Mac, says that “…Demand has been impacted by affordability headwinds, but low inventory remains the root cause of stalling home sales.” So, it’s still low inventory of homes for sale that’s impacting sales numbers, and demand remains strong despite the uptick in rates.
Buyers now realize that the rates now are here to stay for the near future, and if and when they do improve, there are opportunities to refinance. Plus, I always ask people to consider the opportunity cost. We know home prices are appreciating, so how much more will you be paying for the home in the future and you want to be on the advantageous side of the appreciation rather than on the outside looking in. If you’d like to look at all these numbers for your specific situation, let’s talk! You can simply send me an email or call/text me at 818.307.6072 to set up a call.
What I’m watching this week…
There are numerous reports coming out of the housing market that will be giving us a good look at how the factors the Fed Minute mentioned – like inflation – are impacting sales.
First up is Existing Home Sales. A slight decline from June’s 4.16 million annual rate to 4.15 million is the expectation for July, a month before mortgage rates started to jump. As we know, the National Association of Realtors has been citing lack of available inventory for the slow pace of sales. So, we’ll see how the numbers look.
Also expected for release is the report on New Home sales. Sales in July, a month before mortgage rates began their spike, are expected to edge higher to a 705,000 annual rate after slowing to 697,000 in June, which, though lower than expected, was still the second-highest rate in more than a year.
There will also be lots of scuttle in economic news around the Fed’s Jackson Hole Symposium. Fed Chair Jerome Powell will be speaking on Friday, and historically, this event has the potential of creating some volatility in markets and interest rates.
It’s impossible to say where we’ll end up with rates at the close of business on Friday, but I’ll be watching it all for you and report back.
