Housing Market Update | Week of July 7th

Last week, the unemployment rate dropped from 4.2% to 4.1%, surprising economists and sending the 10-year yield + mortgage rates higher before the three-day weekend. Wednesday’s ADP employment report showed 33,000 job losses, which made economists expect similarly underwhelming numbers in Thursday’s report from the Bureau of Labor Statistics (BLS). However, job growth exceeded expectations on Thursday morning, which caused the 10-year to spike heading into the weekend. Another headline from last week was the passing of President Trump’s tax & spending bill, also referred to as the “One Big Beautiful Bill Act.” Although this bill will likely increase the U.S. deficit, it shouldn’t have much impact on mortgage rates. There are some tax benefits that you can pass on to your past buyers, which we’ll touch on in the next section. Last Week's Mortgage Rate Recap Rates Dropped Slightly Last week’s jobs reports gave economists plenty to consider. The BLS reported that 147,000 jobs were created in June, which was significantly higher than the estimated 110,000. This was a bit of a shock, especially considering that the ADP report released the day before showed 33,000 job losses. When you dive into the specifics of the BLS report, it shows that the labor market isn’t as healthy as the report suggests. Of those 147,000 jobs, 73,000 were in state and local government. This was our final jobs report before the next Fed Meeting on July 30th, effectively ending any chances of a rate cut later this month. The markets closed early on Thursday and didn’t have much time to react to this report, which meant that rates still finished the week lower than they started. Another headline from last week was the passing of President Trump’s controversial tax & spending bill. Currently, this bill has limited influence over mortgage rates, although there are longer-term concerns about the potential increase in the U.S. debt level. There are a few extensions and increases in real estate tax deductions that you and your buyers should be aware of. Increased SALT Deduction Cap: The maximum deduction cap for state and local taxes (SALT) will increase from $10,000 to $40,000 per household from 2025 to 2029. Permanent Mortgage Insurance Deductions: Borrowers can now permanently deduct mortgage insurance premiums (PMI, FHA MIP, VA funding fees, and USDA guarantee fees), subject to income limits. Mortgage Interest Deduction Caps: Homeowners now have a permanent $750k cap on Mortgage Interest deductions. This Week's Mortgage Rate Forecast Rates Should Be Steady This week is a quieter week in terms of raw economic data. So far today, the 10-year has inched higher as markets continue to react to Thursday’s BLS report. One thing to keep an eye on is any headlines regarding tariffs. Last week, Treasury Secretary Scott Bessent said that the U.S. plans to impose 10% tariffs on approximately 100 countries, with a new deadline for deals to be struck set for August 1st. Another round of trade war headlines could impact the 10-year. Beyond that, we’ll want to pay attention to our weekly initial jobless claims report. Last Thursday’s report showed that initial claims dropped for the second consecutive week. With the variables and caveats evident in Thursday’s BLS report, these initial claims reports will provide us with some much-needed context when analyzing the true health of the labor market. As always, if you have any questions throughout the week regarding rates or specific products for any of your buyers, make sure to 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.