Fed – at the Jackson Hole meeting fed Chair Jerome Powell finally confirmed a September 18 rate cut “The time has come for policy to adjust. The Direction of travel is clear and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.“ While he didn’t commit to the size of the cut, he did confirm less restrictive policy as inflation has come down significantly. Fed Futures continue to price a 100% chance of a 25bp cut in September with a 33% chance of 50pt. The market is putting a 73% chance of 100bp of cuts by the end of the year which would require a 50bp cut at one of the next three meetings. The market is also pricing in another 125bp of cuts in 2025, or 225bp over 2 years which brings the Fed Funds rate down to 3.125% – still above inflation. Remember that the Fed Funds rate is the short-term rate that banks lend money to each other at, and while the Feds words and actions impact long term mortgage rates, they do not set mortgage rates.
Mortgage Rates improved marginally this week as the price of Mortgaged Backed Securities (MBS) crept up to re-reach the best levels we have seen since May of 2023. Mortgage rates are down approximately 0.75% from this time last year.
Home Sales – NAR released their Existing Home Sales Report, which measures closing on existing homes (90% of the market), and it showed that home sales rose 1.3% in July to an annualized pace of 3.95M units. This breaks a 4-month losing streak. Sales are down 2.5% year over year. As rates decline we anticipate this number to improve. Inventory increased 0.8% month over month to 1.33M units. Inventory is up 20% year over year. There is approximately a 4-month supply of homes which is skewed in favor of sellers where a 4.6-month supply is a balanced market. Homes are averaging 24 days on the market and the median home price is $422,600 – up 4.2% year over year.
Rents – Core Logic released their single-family rent report for June which showed that single-family rents increased 2.9% year over year. At the low-end single-family rents increased 1.9% compared to high-end properties which increased 3.1% year over year. Single family rents continue to increase at a stable rate and are up $300 in the past two years.
Mortgage Applications to purchase homes fell 5% last week and are down 8% year over year. Refinance applications cooled off by 15% last week but are up 90% year over year.