Blog posted On November 21, 2022
Mortgage rates were relatively unchanged last week with much less volatility than in recent months. They could have continued trending lower last week were it not for comments from various Federal Reserve members discouraging the markets from getting too excited for future declines. What does that mean? The Fed is extremely unified in its determination to lower inflation and will likely need more than one month of good inflation news to consider pausing rate hikes.
News like this wasn’t necessarily a shock to the markets, which is why it didn’t send them into a tailspin. But it certainly could have been a factor that prevented them from making any further gains – which might not be a bad thing in terms in terms of volatility prevention. If the markets got too carried away, they could have sent rates much lower. Lower rates initially sound great, but they also leave more room for larger climbs in the future if the next inflation report is hotter than expected. The consumer price income (CPI) inflation report coming up on December 13th will be a huge factor affecting Fed’s decision on the federal funds rate the following day. Right now, the markets are prepped for a 0.50% increase to the federal funds rate, but a hotter-than-expected inflation report on the 13th could cause the Fed to vote for 0.75%.
It's unlikely any upcoming economic reports will hold the same weight as December’s CPI. But this week, the new home sales report for October is coming up. The new home sales report tracks the sales of newly constructed homes and accounts for about 10% of total residential real estate transactions. In September, new home sales fell 10.9% month-over-month down to a seasonally adjusted annual rate of 603,000.
If you have any further market questions, let us know.