Phoenix, AZ Weekly Housing Market Update

The Federal Reserve will be meeting on July 27th, 2022. They will be raising the Fed Funds rate between 75 and 100 basis points. This increase is anticipated to effect 30-year mortgage rates, causing them to go higher. The Federal Funds rate is the rate at which banks lend to each other. Mortgage rates are indirectly impacted by adjustments to the Fed Funds rate via the 10-year treasury rate. Mortgage rates generally follow the pattern of 10-year treasury yields. The chart below shows the relationship between the three measures. While it is generally the case that mortgage rates are impacted by the Fed Funds Rate, the extent at which the Fed is purchasing (or not) Mortgage Backed Securities (MBS) is an important factor as well. When the Fed is not purchasing MBS, interest rates are naturally set based on market conditions and private investor appeal. 

On a $700K home purchase, assuming a 20% down payment, an interest rate increase of .5% will raise monthly payments approximately $180 per month. If mortgage rates increase 50 basis points as a result of the Fed Funds Rate increasing 75 to 100 basis points, would that home purchasing demand be further damaged considering the painful high rate of inflation consumers are experiencing?  More-than-likely, the effect would result in less demand. However, it may not be as destructive as would appear at first glance. It is important to note that level of 'cushion' or 'reserve' consumers have today. Consumers excess checking account and currency reserves are at all time high levels due to the Covid Relief Funds that started in 2020. The chart below shows that consumers are in a solid position to handle higher prices, at least in the short term. 

Phoenix, AZ Metro Daily Housing Market Snapshot

If you are looking to purchase or sell a home in the Phoenix, AZ Metro, contact Dennis Carr, Phoenix Area Realtor at 480.825.2870