Market Update: Rates Rise; Case-Shiller Home Price Index, New Home Sales, and Pending Home Sales Coming Up This Week

Blog posted On October 24, 2022

Last week, mortgage rates continued their upward trend, but saw some hope at the end of the week. A big debate impacting current rate trends is the trajectory of the Federal Funds rate hikes. While the Federal Funds rate doesn’t directly set interest rates, it can influence trends. Right now, the bond market is debating whether or not the Federal Reserve can/will continue hiking the benchmark rate at the same pace. The past three rate hikes have been 75 basis points. Most rate hikes throughout history average around 25 basis points. The aggressive rate hikes of late are a tactic to combat against high inflation levels. Basically, the Fed has “remained very unfriendly toward rates,” writes Matthew Graham of Mortgage News Daily, and is waiting to see a change in inflation before changing its stance. Many experts believe the Fed can’t continue at its current pace; the consequence would be a huge negative effect on the national and global economy.  

Up until recently (the end of last week), we hadn’t received much insight into the Fed’s thoughts on future hikes. The markets had more or less been guessing based on releases of important economic data. We finally heard from Fed Member Mary Daly, who said “the time is now to start talking about stepping down. The time is now to start planning for stepping down." While she didn't explicitly say that the next Fed meeting will conclude with a lower rate hike than previous meetings, she did offer some light at the end of the tunnel for the market. "We might find ourselves, and the markets have certainly priced this in, with another 75-basis-point increase," she added. "But I would really recommend people don't take that away and think, well it's 75 forever." Daly also mentioned that the Fed is moving to a second phase of policy tightening, which is "incredibly data-dependent.”  

Important housing market data scheduled for release this week includes the Case-Shiller home price index, new home sales, and pending home sales.  

The S&P Case-Shiller home price index tracks changes in the value of homes involved in two or more sales transactions across 20 major metropolitan areas throughout the country.  Though the data lags by a month, it is still used to gauge home price appreciation trends. In July, home price appreciation cooled at the fastest pace in the index’s history. The 20-city index dropped 0.4% month-over-month and had an annual appreciation of 16.1%, much lower than levels the previous month. 

The new home sales report tracks the sales of newly constructed homes and accounts for about 10% of total residential real estate transactions.  New home sales saw a shocking monthly gain of 28.8% in August. In September, they are expected to fall. 

The pending home sales index tracks changes in the number of homes that are under contract but not yet closed. Pending home sales slipped 2% in August. They’re likely to fall in September as well due to seasonal cooling.  

Also scheduled for release this week is the core PCE index, an important indicator of inflation for the Fed.  

Curious about rate trends or what's happening in the market? Reach out and would be happy to talk. 

Sources: Mortgage News Daily, Mortgage News Daily, Reuters