The RUNdown: The average 30-year fixed mortgage rate climbed from 6.9% in September to 7.40% today. That's a significant move in just a few weeks, putting rates at their highest level in nearly three years. After 6 weeks of rising rates, we finally saw some relief last week as Treasury yields pulled back due to extra demand. Currently the 10-year treasury sits at 5.14% which many investors deemed a good return amid growing concerns about technology stocks and the outlook for the AI boom.
Below the chart showing national average mortgage rates, see this month’s top stories affecting those rates.
Inflation Inflation Inflation – What year is it? 2022?
September consumer prices were up 3.7% year over year, according to the reported CPI data. That number is higher than the Fed’s 2% target, and sent the probability of another rate hike at the Fed meeting in December from 49% to 75% today. Remember, the Fed controls its short-term policy rate, not the 30-year mortgage rate. Implications of more hikes sooner though is a recipe for treasuries and mortgage rates to increase.
Housing inventory is improving, but affordability isn't.
National Inventory reached 1.60 million homes, the highest level since November 2019. Rates shooting up into the mid 7%s is partially the culprit. Buyers have more options and more time to compare properties than they did previously. But inventory is not uniformly high across every neighborhood or price range, and while many Denver neighborhoods have swung towards being buyer's markets, not all of them. If you’re in the market, connect with your realtor to watch local inventory, days on market, and seller concessions rather than apply the national numbers to every neighborhood. Seller concessions are an especially hot topic right now being negotiated between buyers and sellers, as those can be used to cover closing costs or buy down the interest rate, either permanently or temporarily, and help buyers with affordability challenges.
Political fights
President Trump has continued to try to remove Fed Governor Lisa Cook, launching a new inquiry into allegations involving her mortgage applications. Cook disputes the allegations and is challenging them in court. A hearing had been scheduled for November 5, although her attorney has requested a later date. The bigger story here is the debate over Fed independence. Investors need confidence that interest-rate decisions are based on economic conditions rather than political pressure. If that confidence weakens, it puts upward pressure on borrowing costs, although the actual market reaction is what matters.
Midterms
The midterms are coming up in two weeks. While polling data shows a high likelihood of the Democrats winning back at least one chamber, those polls are anything but certain. Gridlock has historically moved rates in both directions, so it’s impossible to say what will happen this time around. If Democrats gain control of one or both chambers of Congress, expect more scrutiny of the administration's policies, including the Iran conflict. A change in control could affect funding debates and pressure to reconsider military involvement, but it wouldn't automatically end the war. The Iran War has contributed to higher energy prices which are adding to inflation. If tensions ease and oil prices fall, that should help inflation and potentially mortgage rates lower in 2027.
