They Already Told us this…Why Act Surprised?

Mortgage rates went up last week while you weren’t looking. It WAS a short week, but we still ended up taking one in the chin when it comes to rates. These 4th of July markets weren’t playing around, and the release of the Fed meeting minutes confirmed what was already admitted by Jerome Powell – They see higher rates on the horizon. Thus, the markets followed suit and mortgage rates went up.

So now here we are again with a potential new interest rate range slightly above the most recent “sideways” range that we’ve been talking about for weeks. But before you start to worry about what that will do to the markets we have an interesting trend that seems to be emerging in real estate contracts these days – counteroffering that buyers provide a loan lock within 48 hours of the offer being accepted. There’s been a few examples of this I’ve seen so far, and I can rationally understand why sellers would want this level of security so that when accepting a buyers offer and taking their property off market, a lock confirmation could bring them confidence in the deals ability to close… especially during these upward swings of interest rates. The last thing you’d want as a seller is a buyer who cancels because the interest rate spits them out from affording the loan.

As we approach the weeks leading up to the next Federal Reserve rate decision, overall sentiment is brace and prepare for a rate hike, most likely 25 basis points, or 0.25%. All things considered, I have to think that the real estate and mortgage markets know that these upcoming moves are really the final nudges of policy, after a prolonged, yet consistent, march upwards that generated significant slow downs in demand compared to the years prior. And even when they do come to a stop in rate policy, the duration of holding their position will create a wake in real estate and mortgage all in the name of curbing inflation. How long DO you think it will take? I’ll go first….2025.

And this week the markets are all going to be focused on inflation and jobs. Those are the primary indicators of what might already be a foregone conclusion of the Fed raising rates at their next meeting coming up at the end of this month.  And everything kicks off on Wednesday.

Wednesday: CPI Month over month, year over year, and Core CPI month over month. These will be watched super closely so that the Fed can have the data they claim they will be most reliant on moving forward in their decision making.

And the same goes for Thursday when we get Core PPI month over month, PPI month over month, and Unemployment claims. Again, these are super important data sets that will help gauge Fed decisions as they measure the impacts that policy is taking on the broader economy.

Friday we get the Preliminary University of Michigan consumer sentiment reading which has been surprisingly strong as of late (just don’t go checking the personal credit card debt chart that seems to be trending in the exact same direction…up and to the right).

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