First, we'd like to wish everyone the best during Hurricane Ian. The homeowners in southwest Florida are in our prayers. Stay safe!
Now, for our market update... As we expected, the Fed ended up hiking the Fed Funds Rate by another 75 basis points last week following the previous hikes of 25, 50, 75, and 75 basis points made at meetings this year. At the post-meeting press conference, Fed Chair Jerome Powell attempted to ease minds by stressing the Fed's commitment to fighting inflation but also recognized that the "soft landing" we hoped for is likely impossible.
After the Fed's missed attempt to display some sort of control over inflation, the Bond market reacted negatively. We were hoping for a better reaction but the one we got is understandable. We'll be keeping an eye on the remaining Fed meetings and hoping that they can convince investors that they are getting a handle on inflation. These meetings will play a huge role in determining the direction of mortgage rates in the new year.
The Fed is expected to make two more basis point hikes in the remaining meetings this year, for a total of 125 basis points. We'll see how those affect a market that seems to have accepted the signs of a recession.
In housing news, Existing Home Sales declined by 0.4% in August to an annual pace of 4.8 million units, which was actually stronger than the expectations of a 2.5% drop. When compared to August of 2021, Existing Home Sales were down 19.9%. This measurement is extremely important for the real estate market, existing home sales make up about 90% of total sales.
Although market activity has undeniably slowed down, home prices continue to be propped up by a lack of inventory. In school, we learned the relationship between supply and demand, and we're watching the perfect example of it now. By the end of August, the number of homes available fell to about 1.28 million, of which 39% were already under contract and unavailable. Keep in mind that in a normal market, about 25% of inventory is under contract. This speaks to the high demand for homeownership and will continue to support home prices.
The Single-family Rent Report from CoreLogic shows that rent prices for single-family dwellings are up 12.6% from last year. Hopefully, renters will look to the opportunity that homeownership offers and start building their own wealth rather than their landlord's.
Next week, we'll dive into some more home appreciation and sales data, as well as the inflation numbers for August, as the Personal Consumption Expenditure data will be reported this Friday. Stay tuned!
New VA Loan Limits
Our qualified VA borrowers can now use the expected 2023 loan limits on a purchase or refinance - up to $4M!