Hi Reader,

The average 30-year fixed mortgage rate ended the week at 7.07%, significantly up from 6.89% the prior week, according to Mortgage News Daily. Freddie Mac’s weekly survey put the average 30-year fixed mortgage rate at 6.76%, up from 6.61% the prior week.

Why did rates move dramatically up?

The 10-year Treasury yield moved sharply higher last week, ending Friday at 4.974%, up 0.191 percentage point for the week and reaching its highest level since October 2023 (because the 10-year Treasury yield tracks along with mortgage rates, it's arguably the most important indicator).

The move was driven by several developments:

Treasury Secretary Scott Bessent’s Treasury Department increased its planned buyback of longer-term Treasurys to $6 billion, triple the typical amount, in an effort to support the bond market. But the move did little to bring yields down, and the Treasury ultimately purchased $5.2 billion of bonds as yields continued to rise.

On Thursday, the 10-year Treasury yield rose to 4.943% as the bond market sold off. Wholesale inflation rose 0.4% in August, and the 30-year Treasury yield reached 5.36%, its highest level since 2004.

Oil prices also moved substantially higher. Brent crude rose 6.3% to $107.63 per barrel as tensions escalated in the Middle East.

On Friday, the Consumer Price Index showed annual inflation holding steady at 3.4%, in line with expectations. However, the measure excluding volatile food and energy prices came in higher than expected.

Following the CPI report, expectations for a Federal Reserve rate increase at this week’s meeting rose to more than 90%, according to the CME FedWatch tool:

There was one positive development for bonds during the week. Wednesday’s $39 billion auction of 10-year Treasury notes saw solid investor demand. The notes were sold at a 4.834% yield, below what traders had expected, and Treasury yields briefly moved lower following the auction.

By the end of the week, however, the 10-year Treasury was again approaching 5%. This morning, it is just a hair under 5%:

The big takeaway

Last week can best be interpreted that the market has and is pricing in the expected rate hike. The Fed meeting is this Wednesday. Early last week, the prediction of a Fed Funds rate increase was around 60%, and as you can see above, it is now about 90%.

The continued fighting in the US/Iran war, with shipping routes constrained, means oil prices might stay elevated for longer, directly affecting inflation worldwide. The Fed has explicitly said inflation is their biggest concern, and given that Bessent seems to be trying but unable to tamp down bond yields, the market expects the Fed to use a Fed Funds hike as a lever of control.

What is happening in housing

​National Association of Realtors (NAR) reported that existing-home sales declined 2% in August. At the same time, inventory increased to 4.9 months of supply, the highest level in more than 10 years. NAR Chief Economist Lawrence Yun said:

​Redfin estimated that there were approximately 1.53 million sellers and 972,300 buyers in August, creating the widest gap between sellers and buyers in its records going back to 2013.

That balance varies significantly by market. Nashville had 139% more sellers than buyers, Miami had 138% more and Houston had 131% more. San Francisco, by contrast, was one of only five markets identified as a seller’s market.

Also, "Chicago and New York are seeing the fewest cuts due to low supply."

​Price trends are also diverging by geography.

Among the markets with the largest year-over-year declines in median price per square foot were:

• Austin: -8.1%
• Tampa: -5.6%
• Memphis: -4.1%
• San Antonio: -3.6%

Northeast and Midwest still in demand and climbing

Meanwhile, Providence was up 9.3%, Indianapolis was up 4.4% and Chicago was up 3.6%.

Buyers are also seeing more price reductions. Zillow reported that 26.3% of listings had a price cut in August, while active inventory was up 3% from a year earlier.

What I can do to help your buyers

This is a confusing environment for buyers.

Rates have moved higher, affordability remains difficult and housing conditions vary considerably depending on the market, property and price point.

If you have a buyer who is struggling to understand what they can afford or how to approach a purchase right now, I’m happy to help clarify the numbers and look at strategies on the mortgage side.

That could include:

1. Comparing different down payments
2. Structuring the loan differently
3. Evaluating available loan programs

The goal is to give buyers a clearer understanding of their options so they can make an informed decision about what works for them.

I hope your week is off to a great start!

-Nicole

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Nicole Hamilton Bernheimer | NMLS #2354049

nicole@homeownering.com, 917-650-0167

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