For two years everyone has been asking when the Fed will cut. As of Friday afternoon, the market says the far more likely move this week is a hike. That changed fast and the reason is not what most people think.
Part One: The national week
August inflation came in at 3.4 percent, a tenth above forecast. Gasoline alone rose 3.9 percent and accounted for more than a third of the entire monthly increase. Energy is up 16.3 percent over the year.
Buried underneath that, core inflation actually improved. Stripping out food and energy, the annual rate eased to 2.4 percent from 2.5. So the number that spooked everyone was largely the oil spike from a shipping lane on the other side of the world, not a broad price problem at home.
Markets did not split that hair. Odds of a Fed rate hike this Wednesday jumped to 90 percent from 70 in a single afternoon. Freddie Mac finished the week at 6.76 percent and the index that tracks what lenders are actually locking crossed 7 percent for the first time this year.
Read plainly: the headline was hot, the underlying trend was not and the market priced the headline. For anyone still waiting on a lower rate, this is the second week running that waiting has cost money rather than saved it.
Part Two: The local picture
Sellers stopped waiting. After five straight sessions with no price cuts at all, two landed in two days. One of them was an 11.3 percent reduction, the largest single cut I have tracked all summer.
Inventory keeps widening. Eighteen new listings came on in two days, spanning the low $300,000s to $1.2 million and Montgomery County's median still sits near $516,500 with 19 days on market.
And the standoff I have been reporting for a month finally broke. Two identical homes on the same street, same beds, same baths, same square footage, listed $1,000 apart. One cut $25,000 back in August. The other held firm for twelve days and then cut by exactly $25,000. They are $1,000 apart again and the one that moved first is still the cheaper house. Holding out bought that seller nothing.
The weekend board was the fullest I have ever tracked, including seven listings holding open houses in the same two hour Sunday window across four towns.
Part Three: Guidance for September 14 through 19
Everything this week happens on Wednesday. August retail sales land at 8:30 a.m. and the Fed announces at 2:00 p.m. A hike would be the first in a long while and it is now the market's base case rather than a tail risk.
Realtors:
Re-quote every active buyer Monday or Tuesday, before Wednesday afternoon. A payment quoted last week may not survive the announcement.
Expect more price cuts, not fewer. Sellers who held through Labor Day are moving now and a listing with a near-identical comp nearby has less pricing power than its owner thinks.
Buyers:
If you are under contract and the payment works, look hard at locking before Wednesday. The bond market has already moved and not all of it has reached rate sheets yet.
Shop more than one lender. Freddie Mac's own chief economist said it this week and the spread between published indexes and what lenders are actually quoting is currently about $109 a month on a $450,000 loan.
How I can help
Re-quoting before Wednesday: I turn numbers around the same day and my pre-approvals are fully underwritten rather than a soft pull and a hopeful email. If Wednesday moves the market, you will hear the new number from me rather than from a headline.
Expecting more price cuts: when a listing draws showings but no offers, the objection is often the layout rather than the price. Renovation financing lets a buyer fold the fix into the purchase, which turns "it needs work" into an offer instead of another reduction.
Shopping more than one lender: I'll put the 30-year, the 15-year and an adjustable side by side so a buyer sees the real trade. If someone else beats me honestly, I'll tell you.
The takeaway
Inflation ran hot on gasoline while the underlying trend quietly improved. Rates went up anyway. Locally, sellers moved on price, inventory widened and buyers had more genuine choice than they have had in years.
If you are waiting for perfect conditions, they do not arrive. The question is never whether rates are low. It is whether the payment works for your life and that is a question I can answer in an afternoon.
Warmly,
Mackenzie
Mortgage Mom, Loansteady Mortgage