A week before the Fed's announcement, mortgage rates slightly rose to 5.54%. Rates will continue to increase next week, as the Fed will likely raise interest rates by a full percentage point. Nevertheless, even though the upcoming rate hike will be more aggressive, it's expected to have a smaller impact on mortgage rates. Data shows that mortgage rates have already priced in some of the effects of the upcoming Fed's rate hikes.
With rising mortgage rates, home buying activity is closely watched every month. Meanwhile, the housing market continues to show signs of cooling. Home sales have dropped for the last five months heading toward pre-pandemic levels. This observation is based on the seasonally adjusted figures reported by the news. In fact, fewer homes were sold than pre-pandemic. Based on the not actual number of home sales (i.e., not seasonally adjusted data), 526,000 existing homes were sold in June, nearly 2,000 fewer homes than in June 2019, due to low affordability. As home buying is now about 80% more expensive compared to then, nearly 25% of those who purchased their home in 2019 couldn't buy it now. These buyers no longer earn the qualifying income to purchase the median-priced home. Since then, home prices have increased by 50 percentage points while mortgage rates are two percentage points higher. In contrast, wages have increased by 15 percentage points. Consequently, home buying activity is slowing down as many buyers are priced out.