Housing Market Update | Week of September 15th

We have a massive week ahead with the Federal Reserve expected to cut the federal funds rate on Wednesday. This expected 0.25% cut has already been priced into the markets, with the 10-year down roughly 0.3% since Fed Chairman Jerome Powell suggested a rate cut during his speech at the Jackson Hole Economic Symposium on August 22nd. What makes this week so pivotal isn’t the rate cut itself; it’s more about Powell’s rhetoric regarding additional rate cuts during the final two Fed meetings of the year in October and December. Over the past few years, the Fed has maintained a moderately restrictive policy stance to curb inflation, considering the health of the labor market. However, since the start of summer, U.S. job growth has come to a halt. If this weaker labor data prompts the Fed to become more dovish, rates could decline. More likely, if Powell says they’re waiting for more data to drive future decisions, we could see rates bounce slightly higher. Last Week's Mortgage Rate Recap Rates Dropped Last week's inflation data was the final hurdle the market needed to confirm a rate cut during this week's Fed Meeting. Our Consumer Price Index (CPI) and Producer Price Index (PPI) both came in at 0.3% month-over-month, exactly in line with economists' expectations. Although inflation is going up, it's currently not spiraling higher. Tariffs remain a wildcard because of their potential to contribute to rising inflation, but the Fed has stated in the past that tariffs often cause one-time price increases instead of long-term inflation. With tariffs on different countries going into effect at different times, last week’s data didn’t raise any red flags with the Fed, all but guaranteeing this week’s anticipated cut. This Week's Mortgage Rate Forecast Rates Could Be Volatile The Fed is expected to cut rates this week, but the market’s reaction may not be as straightforward as many assume. During last year's September Fed Meeting, the Fed cut rates by 0.50%. After the cut, though, bond yields increased. This is because the overall economic data showed signs of improvement, pushing the 10-year and mortgage rates higher. This year, the backdrop is a little different. The labor market has softened, and overall economic data isn’t as strong. That means the risk of mortgage rates spiking after the Fed cut is lower than it was in 2024. However, much of this week’s rate cut is already priced into today’s mortgage rates. Powell's rhetoric during his post-meeting press conference on Wednesday will reveal whether the Fed will maintain its hawkish economic stance or adopt a more dovish approach. From a data standpoint, if the labor data shows improvement, yields could climb and take mortgage rates higher. On the flip side, if the labor data continues to weaken, rates may hold steady or even drop further. This is a pivotal week for the housing market. It’s important to note that mortgage rates usually drop before the Fed cuts rates and tend to rise slightly after the rate cut is official. If you have any questions about the market or want to connect any of your buyers with a UMortgage Loan Originator, follow this link to connect with an expert near you!

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.