What was the mortgage rate reaction to the Fed announcement?
Every market appeared to be volatile after the Federal Reserve announced an interest rate, but the impact was visible in the mortgage rate market. A 30-year fixed mortgage rate spiked to 6.66%, a new 14-year high. FHA 30-year fixed mortgage rate wasn’t far off at 6.67%, and 15-year fixed made it to 5.92%.
The Dow Jones Industrial Average dropped 200 points, climbed 300 points, and then fell to end the day down over 500 points for the day.
The gold and silver markets saw a surge after the comments from the Fed. Investors were seeking a hedge against inflation, and precious metals are often seen as a safe haven.
Fed Chairman Powell comments on housing market
In addition to the announcement on interest rates, Federal Reserve chairman Jerome Powell also commented on his expectations for the housing market. He believes that previously red-hot housing prices will see a ‘correction’ in the coming months after housing prices went up ‘an unsustainably fast level’.
A cooling off of housing prices over the winter may get more buyers back into the market in the spring, even if mortgage rates are higher than previous years.
Have home prices already started to drop?
While rates have definitely climbed in the past few months, home prices in August saw a 6% drop from their peak in June. That represents the biggest 2-month drop in almost a decade. August was also the 7th straight month in which home sales slowed.
Home prices are still up 8% nationally year over year, but there are signs that the market is cooling off as we transition into the fall.
The fact that housing markets have already started to cool off may be a sign that the Fed chairman’s prediction of a pending ‘correction’ has already started. It may be possible to offset a rising mortgage rate environment with housing prices that are coming down.
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