Housing projections over the next three months

Following a calm Friday, rates shot up at the beginning of the week. The 30-year fixed rate mortgage increased another 22 basis points to 5.95%. On a similar note, the 15-year mortgage moved up 23 basis points to 5.24%.

current outlook:

Rates returned to last week’s highs, putting them at their highest levels in two months. Some of this reaction can be attributed to markets being surprised over Powell’s statements at the Jackson Hole summit. He reaffirmed that the Federal Reserve would continue raising interest rates in attempts to tamp down inflation, even if it results in “some pain” to the U.S. economy. Currently, markets are pricing in a ⅔ possibility of a 75 basis point hike and a ⅓ possibility of a 50 basis point hike in September. On the housing side, prices declined in July for the first time in almost three years according to one Black Knight study. While it was a small decline (a measly 0.77%), it may mean one of two things over the next three months: 1) buyers are simply waiting for prices to calm down before they begin shopping, which will keep year-over-year growth above 10% or 2) buyers are holding out for a return to the more affordable prices seen in Q1 2022, which will lead to price deceleration and a few months of decline.

The Federal Reserve puts its food down on raising the Federal Funds rate and mortgage rates react accordingly

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