The most important Fed meeting of all time is just a week away. As we wait for the central bank’s verdict on whether to raise interest rates, here’s what mortgages are doing.
Nothing! They’re doing nothing. For the seventh week running, the average cost of a 30-year, fixed-rate home loan is below 4 percent. At this time last year, rates averaged 4.12 percent, according to Freddie Mac‘s benchmark survey of lenders. The U.S. has never had such an extraordinary run of cheap borrowing.
In an effort to juice the economy, the Fed hasn’t raised interest rates in almost a decade. There never seems to be a perfect time. This month, most people thought the Fed was good and ready. Then China went haywire and Friday’s jobs report fell short. Now we don’t know what they’ll do when they meet next week.
“The employment report released last Friday provided mixed signals, adding one more note of uncertainty prior to the Fed’s September meeting,” Freddie Chief Economist Sean Becketti wrote.
Yesterday we got more so-so data on jobs from a report that Fed Chair Janet Yellen watches closely. The Job Openings and Labor Turnover Survey, JOLTS for short, looked pretty good on the surface, with new openings hitting a record of nearly 5.8 million. But about 8 million people are looking for work and hiring actually fell. Turnover is weak, too, a signal that people are afraid to or unable to quit their jobs for new ones.
In short, the labor market is still licking its wounds. Has it healed enough for Yellen and her crew? We’ll know in a week. Until then, remember that the Fed is setting rates on short-term borrowing, not mortgages. If it does act, mortgage rates won’t necessarily rise. We see no serious risk to the housing market even if they do. Don’t forget this chart:
Questions? Comments? Lorraine.woellert@redfin.com
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