According to Redfin News, we're heading into a pretty crucial couple of weeks ahead of the Federal Reserve's September 16th meeting, and mortgage rates could bounce around quite a bit as the markets try to figure out what the Fed will do. The situation got more interesting after Fed Chair Warsh gave a speech at Jackson Hole that signaled a rate hike might actually be back on the table, which shifted expectations pretty dramatically from where things stood just a couple of weeks ago.
This week and next week, we're going to see some important economic reports come out that could influence the Fed's thinking. The August jobs report drops on Friday, and we're expecting to see job creation rebound to around 55,000 positions after July had a surprising dip. On Wednesday, the JOLTS report will give us data on job openings and other labor market activity. Redfin notes that while the Fed will be looking at all this labor data closely, inflation is really what's on their mind right now when it comes to making their decision.
What Warsh's Jackson Hole speech did was flip the script on how the market should think about the next meeting. Before his speech, most people figured the Fed would keep rates steady, but now the thinking has shifted so that we'd probably need to see pretty solid economic data come in to avoid a rate hike. Redfin reports that futures markets are currently pricing in roughly a two-thirds chance of a hike happening at the September meeting. That said, there's still a good chance inflation data coming next week could show some cooling that gives the Fed room to wait on making a move.
During the Fed's blackout period leading up to the September 16th announcement, we'll also be hearing from various Fed governors who might give us hints about which way the voting committee is leaning. According to Redfin, Governor Hammack has already signaled he wants tighter policy and dissented in favor of a hike at the last meeting, so his comments this week could be telling about the internal debate.
What I am seeing locally here in the Bay Area and East Bay is that buyers are starting to get a bit more breathing room as inventory is ticking up and demand softens slightly. If the Fed does raise rates, we'll likely see some additional pressure on mortgage rates, which could push some fence-sitters off the market. But if this data comes in softer than expected and the Fed holds, we might see some stabilization in rates that could actually help move more deals. Either way, this is a time when serious buyers who have been waiting for better conditions might finally find their opportunity to negotiate.
