Mortgage Market Update: Fed Rate Cuts and Jobs Data Push Rates Lower

The message from last week’s jobs data was loud and clear: the labor market is cooling off, and this shift is having a direct impact on mortgage rates.

Here’s what we saw:

• JOLTS: Job openings came in much lower than expected.
• Beige Book: 9 out of 12 regions surveyed reported “flat or declining activity,” up from 5 in the last report.
• Challenger Report: Announced layoffs spiked, with the weakest hiring plans since 2005.
• ADP Report: Lowest job gains since January 2021.
• BLS Report: Only 142,000 jobs added in August, with previous months’ figures revised down by 86,000.

How It Affected Mortgage Rates

It was the BLS jobs report last Friday that really pushed Treasury yields and mortgage rates down. As of Wednesday, the average 30-year mortgage rate dropped to 6.11%, which is a significant reduction—200 basis points (2.0%) below the October 2023 peak.

That’s great news for buyers, but it’s important to note that the CPI report was a bit of a letdown. It took the idea of a 50 basis points rate cut off the table for the time being.

Odds on Fed Rate Cuts at Upcoming FOMC Meetings

Here’s where things stand with the Federal Reserve’s upcoming meetings and potential rate cuts:

• September 18: A 100% chance of a rate cut (same as last week), with only a 15% probability of a 50 basis points cut (down from 39% last week).
• November 7: A 100% chance of a rate cut, and a 46% probability that rates will be 75 basis points lower (down from 49% last week).
• December 18: Another 100% chance of a rate cut, with a 48% probability that rates will be 100 basis points lower than current levels (about the same as last week).

What Does This Mean for You?

If you’re considering buying, now could be an ideal time to lock in a mortgage rate before the Fed’s next move. Lower rates mean more purchasing power, which is crucial in high-cost areas like Greater Boston. But with the Fed watching inflation closely, buyers need to stay informed and be ready to act when the opportunity arises.

As we head into fall, historically a slower season, I expect some shifts in inventory and competition levels, which could provide a window of opportunity for savvy buyers.

Keep in mind that while rates are falling, the overall economic picture is complex, with the potential for more changes as we get closer to the end of the year.