Market Update: Rates Drop Sharply, Coming Up This Week: New Home Sales, Case-Shiller Home Price Index, and the FOMC Meeting

Blog posted On July 26, 2021

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Mortgage rates continued to drop last week in reaction to the Adverse Market Refinance Fee removal. An additional influence on the rate trend was the significant improvement in the bond market. The combination of these two factors pushed rates for the average lender to their lowest range since February. There are also several important reports scheduled for release this week that could have an impact on rates and the housing market.

On Monday morning, new home sales are scheduled for release. The Case-Shiller home price index is scheduled for release Tuesday morning. On Tuesday and Wednesday, the Federal Open Market Committee (FOMC) will meet for another semiannual monetary policy meeting.

The new home sales report tracks the sales of newly constructed homes and accounts for about 10% of total residential real estate transactions. In May, new home sales fell 5.9% to a seasonally adjusted annual rate of 769,000. This level was 9.2% above the May 2020 estimate. The number of new houses for sale reached a level of 330,000 – representing a 5.1-month supply. Though expensive home building materials, high demand, and limited inventory have all pushed the supply of homes to record lows over the past year, it looks like it is starting to rise once again.

The S&P Case-Shiller home price index tracks changes in the value of homes involved in two or more sales transactions across 20 major metropolitan areas throughout the country. Though the data lags by a month, it is still used to gauge home price appreciation trends. In April, the 20-City Composite posted a seasonally adjusted increase of 1.6%, month-over-month. Year-over-year, home prices jumped nearly 15%. The highest increases were in Phoenix, San Diego, and Seattle, though all 20 cities reported increases in April. Home prices have continued to rise over the past year at some of the highest recorded rates of increase. One factor that could help push them down is an increase in interest rates, though the FOMC believes that the spike in inflation and prices is temporary.

The Federal Open Market Committee (FOMC) sets the federal funds rate.  The federal funds rate will influence mortgage rates but not set them exactly.  When the Fed raises rates, mortgage rates typically go up.  When the Fed lowers rates, mortgage rates typically go down. Last month, the FOMC voted to leave the benchmark interest rate near zero, however they began discussing a plan of tapering their asset purchases. Consequently, the average lender’s mortgage rates shot up during the two weeks following the meeting. This month’s meeting could see a similar reaction in the market.

Also scheduled for release this week is the Federal Housing Finance Agency (FHFA) home price index, the weekly mortgage application survey, and the weekly jobless claims survey. On Thursday morning, the U.S. Department of Commerce will release its second quarter GDP estimate and the National Association of REALTORS® (NAR) will release its pending home sales report. Scheduled for release on Friday is consumer spending, personal income, and core inflation.

With home prices at an all-time high, homeowners have more equity than ever before. The removal of the Adverse Market Refinance Fee makes now a perfect time to take advantage of the equity you’ve earned and get a cash-out refinance to pay off high-interest debts before interest rates begin to rise again. If you would like to learn more about our cash-out refinance options, let us know.


Sources:, MarketWatch, MarketWatch, Mortgage News Daily, S&P Global