Author: Eric BernsteinPublished:
Last week, the housing market proved once again just how resilient it is to the pressures of high mortgage rates. Home prices continued to reach new highs as inflation data came in right on target - providing additional proof that it may be time for the Fed to start cutting rates.
A Bloomberg opinion published last week suggests the Fed should start cutting rates during their meeting THIS WEEK.
As a result of the positive inflation data, the average rate on a 30-year fixed rate conventional loan fell slightly to 6.75% (down from the 6.78% reported last week).
A Bloomberg opinion published last week suggests the Fed should start cutting rates during their meeting THIS WEEK.
As a result of the positive inflation data, the average rate on a 30-year fixed rate conventional loan fell slightly to 6.75% (down from the 6.78% reported last week).
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A Big Week For Home Sales Data
Home sales data for both existing homes and new construction were released last week and the data was a little surprising.
Existing home sales fell more than expected in June (3.89M actual vs 3.95M expected). It's the lowest level seen since December - BUT the surprise is that home prices are trending in the opposite direction - hitting another record of $426,900, which is up 4.1% from a year ago.
New home sales had a very similar story, hitting a 7-month low due in large part to higher mortgage rates and falling well short of expectations (617k actual vs 640k expected). However, new home prices also remain stubbornly high at $417,300, up 2.5% month over month.
Both new homes and existing homes are still facing an inventory crunch, but inventory is finally starting to increase to a level that allows buyers greater negotiating power in certain pockets across the country. Specifically, inventory in Texas is making it possible for buyers to negotiate a great deal, but that can all change at the drop of a hat when the Fed finally starts cutting rates.
Remember, whether you decide to buy from a builder or an existing home seller, make sure you ask about incentives to help reduce your interest rate during what appears to be the tail-end of this prolonged high interest rate environment. It will help bridge the gap in monthly payment so you can buy while buyers have the most negotiating power today - before interest rates head lower.
The PCE Index was Another Good Sign for Rates
The personal consumption expenditures price index fell month over month, now just up 2.5% from a year ago (down from 2.6% last month). For context, PCE was at 7.1% in June 2022 and this is the lowest that PCE has been since February, when inflation started to get hot again.
Why does this matter? It's more proof that we are heading towards 2% - the Fed's target for inflation, which couldn't be coming at a better time. Cracks are starting to appear throughout the economy (with elevated jobless claims and record credit card debt) due to high interest rates, and the Fed will need to start cutting to avoid a "hard landing".
“A two-word summary of the report is, ‘good enough,’” said Robert Frick, corporate economist with Navy Federal Credit Union. “Spending is good enough to maintain the expansion, and income is good enough to maintain spending, and the level of PCE inflation is good enough to make the decision to cut rates easy for the Fed.”
RATE CUT WATCH:
There's a 100% chance of seeing a rate cut on September 18th!
But there's a 4% chance we see one this Wednesday during the Fed's July 31st meeting... will the Fed surprise everyone by starting to cut rates now?
If they do (which I doubt happens unless the employment numbers reported on Tuesday and Wednesday are horrendous), expect rates to fall dramatically - as it should send shockwaves throughout the market.
A Big Week For Home Sales Data
Home sales data for both existing homes and new construction were released last week and the data was a little surprising.
Existing home sales fell more than expected in June (3.89M actual vs 3.95M expected). It's the lowest level seen since December - BUT the surprise is that home prices are trending in the opposite direction - hitting another record of $426,900, which is up 4.1% from a year ago.
New home sales had a very similar story, hitting a 7-month low due in large part to higher mortgage rates and falling well short of expectations (617k actual vs 640k expected). However, new home prices also remain stubbornly high at $417,300, up 2.5% month over month.
Both new homes and existing homes are still facing an inventory crunch, but inventory is finally starting to increase to a level that allows buyers greater negotiating power in certain pockets across the country. Specifically, inventory in Texas is making it possible for buyers to negotiate a great deal, but that can all change at the drop of a hat when the Fed finally starts cutting rates.
Remember, whether you decide to buy from a builder or an existing home seller, make sure you ask about incentives to help reduce your interest rate during what appears to be the tail-end of this prolonged high interest rate environment. It will help bridge the gap in monthly payment so you can buy while buyers have the most negotiating power today - before interest rates head lower.
The PCE Index was Another Good Sign for Rates
The personal consumption expenditures price index fell month over month, now just up 2.5% from a year ago (down from 2.6% last month). For context, PCE was at 7.1% in June 2022 and this is the lowest that PCE has been since February, when inflation started to get hot again.
Why does this matter? It's more proof that we are heading towards 2% - the Fed's target for inflation, which couldn't be coming at a better time. Cracks are starting to appear throughout the economy (with elevated jobless claims and record credit card debt) due to high interest rates, and the Fed will need to start cutting to avoid a "hard landing".
“A two-word summary of the report is, ‘good enough,’” said Robert Frick, corporate economist with Navy Federal Credit Union. “Spending is good enough to maintain the expansion, and income is good enough to maintain spending, and the level of PCE inflation is good enough to make the decision to cut rates easy for the Fed.”
RATE CUT WATCH:
There's a 100% chance of seeing a rate cut on September 18th!
But there's a 4% chance we see one this Wednesday during the Fed's July 31st meeting... will the Fed surprise everyone by starting to cut rates now?
If they do (which I doubt happens unless the employment numbers reported on Tuesday and Wednesday are horrendous), expect rates to fall dramatically - as it should send shockwaves throughout the market.
Key reporting dates this week:
Mon, 7/29: None Scheduled
Tues, 7/30: S&P Case-Shiller home price index (20 cities), Consumer confidence, Job openings
Wed, 7/31: ADP employment, Pending home sales, FOMC interest-rate decision, Fed Chair Powell press conference
Thurs, 8/1: GDP, Initial jobless claims, U.S. productivity, Construction spending
Fri, 8/2: U.S. employment report
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About the Author:
Eric Bernstein is the President and Co-Founder of LendFriend Mortgage, where he helps homebuyers make smarter, more confident decisions in today’s fast-moving housing market. With over a decade of experience guiding hundreds of clients—from first-time buyers to seasoned investors—Eric brings a mix of market insight, strategy, and personalized service to every mortgage transaction. Each week, Eric breaks down the housing and economic headlines that matter, giving readers a clear, no-fluff view of what’s happening and how it might impact their buying power.