Buyers are pressing pause until Nov. 3 as high rates and oil prices box in the Fed
The Federal Reserve is widely expected to leave interest rates unchanged this week. One veteran mortgage executive says high borrowing costs and election uncertainty are already slowing the housing market.
Policymakers meet Oct. 27–28, according to the Fed’s meeting calendar, with a decision due Wednesday afternoon. Economists expect the benchmark rate to stay at 3.75% to 4.00%. Kiplinger reported that the next increase is most likely in December. The US midterm election is Nov. 3.
Melissa Cohn of William Raveis Mortgage, a regional vice president and 44-year industry veteran, said the Fed is boxed in.
“It’s quite likely that the Fed will do nothing next week. It’s a week before the election. They’re facing a massive conundrum: a major equities meltdown, weaker economic data, and oil prices that keep rising. I think that if oil prices continue to soar, then the Fed should be raising rates in December,” Cohn said.
Market reports show a more mixed picture than “meltdown” suggests. Tech stocks sold off sharply Thursday. By Friday’s close, according to Reuters, the S&P 500 and Nasdaq were on track for modest weekly losses, while the Dow was slightly higher. Oil rose again Friday and is trading above $100 a barrel, market recaps show. Initial jobless claims fell to 194,000 in the week ended Oct. 17, a sign of labor-market resilience.
Rates and buyer hesitation
Cohn described a housing market under strain.
“The housing market is imploding. Mortgage rates are at a point where people just can’t afford to buy, and new-home sales activity is diminishing each week. You keep reading about how the real estate market’s going into a deep freeze. The prices haven’t dropped enough to compensate for the higher interest rates; mortgage rates are higher than they were earlier this year, and it’s impacting affordability,” she said.
Freddie Mac’s survey put the 30-year fixed rate at 7.40% on Oct. 15. The monthly average was 6.07% in February. The Mortgage Bankers Association estimated September new-home sales at a seasonally adjusted annual rate of 584,000, the slowest since April 2020. New-home purchase applications fell 8% from August.
Cohn said the slowdown is also tied to the calendar.
“While I’m still doing business, the velocity of business is greatly diminished from where it was. We’re at a moment where a lot of people have hit the pause button, waiting to see what happens in the election,” she said.
What it means for brokers
Cohn’s comments are her own read of the market, and “imploding” is a strong word. The data do support part of her case: higher rates have cut demand and pushed some buyers to the sidelines. Brokers may want to keep pre-approvals current and be ready for a rebound in applications if rates ease after the election.
