Last week’s rate increases made everything else over the last 6 months look tame. The 3-day jump between Thursday, the 9th and Tuesday, the 14th was one of the biggest on record with average 30 yr fixed quotes going from 5.55% to 6.28%.
It all started with the Consumer Price Index, an inflation report that showed prices rising faster than was anticipated. With the FED stating that inflation is their biggest concern at the moment, and that they do not care if the housing market suffers due to their efforts to contain inflation, you can imagine the effect this had with traders. Along with the CPI came the FED announcement of a .75% interest rate hike. However, interestingly enough, rates began to fall after their announcement. Why? This is because the bond market, which dictates mortgage rates, has always adjusted ahead of time for rate hikes. By the time the FED actually hikes it, it is old news. The market knew from the inflation data that it meant another .25% hike. Then on Monday, the 13th, the market decided it was worth another .25%. When the FED finally pulled the trigger on its hike, the bond market had already adjusted for the most part.
FED chairman Jerome Powell stated that the .75% hikes will be uncommon. This sent the bond market to its best levels of the week. We can take a small breathe as this is doing some good in the real estate sales market and we might be seeing our first temporary price ceiling…Hopefully. However, we need to see some action on the inflation side before we can determine a long-term ceiling.