Look, we're seeing mortgage rates climb to levels we haven't hit since June, and according to Realtor.com Research, the 30-year fixed rate just moved up to 6.76%. The culprit here is pretty straightforward. Geopolitical tensions in Iran are keeping oil prices elevated, which in turn is keeping inflation expectations high. Those elevated inflation concerns are pushing Treasury yields up, and when bonds get more expensive, mortgage rates follow right along. This has been the pattern playing out since late February, and unfortunately it keeps repeating itself each time tensions flare up.
The job market is actually doing pretty well on the surface. The August employment report showed payrolls grew by more than 162,000, which beat what economists were expecting, and prior months got revised upward too. But here's the thing that's important for rates, and it's what's got the Federal Reserve's full attention right now. That strong jobs number didn't really change the market's thinking about whether the Fed will hike rates at their September meeting. The focus is locked on inflation, not employment.
This week's inflation data coming out is going to be crucial. If the Consumer Price Index comes in hotter than expected, it strengthens the argument for a rate hike and puts even more pressure on mortgage rates. A cooler reading could offer some relief to buyers, but right now the odds of a hike are pretty much split down the middle either way. So we're in a genuinely uncertain moment waiting for that data.
On the housing side, the August numbers tell us pending sales actually went negative for the first time since November of last year. That's a meaningful shift. While we're seeing some slight improvements in pricing and delisting activity, those gains aren't strong enough to overcome the drag that these higher rates are putting on buyer activity. We're also heading into fall, which historically sees lighter activity anyway, so that's another headwind.
What I am seeing locally is that buyers are getting fatigued from these elevated rates, and some are just stepping back from the market entirely. The inventory situation hasn't loosened up enough to compensate for this slower buyer interest. Until we either see meaningful progress on inflation or some resolution to the geopolitical tensions keeping oil prices up, I don't expect us to get the relief that could bring this market back to life. We're waiting for real change, not just hope.
