I feel like every week I take a deep breath and think to myself, “WOW, what a crazy week this was!” And like Groundhog Day, it keeps happening over, and over, and over. Crazy is better than dead, so I’ll roll with it!

Lots of important news and information was released this week, especially relating to inflation and the impact on future Fed rate hikes. Without further, let’s get into it!

The Fed has been hiking rates like cah-raazyy trying to get inflation under control. The expectation was that the consumer price index (CPI) data that was released yesterday would show inflation slowing or reversing course. Well, that didn’t happen. Consumer prices (i.e. inflation) rose 0.4% in September and are up 8.2% vs. this time last year. Workers’ wages are also down 3% year-over-year when adjusted for inflation.

What does this mean? I think it almost guarantees a 0.75% rate hike in November AND December, with a strong likelihood for another 1-2 rate hikes in 2023. Previously, I estimated that we’d see a 0.75% hike in November with a final 0.5% hike in December. However, that was before this gnarly inflation data was released. Rate hikes are the best (only) tool that The Fed has to battle inflation, and they will keep swinging that brutal club until inflation gets the joke.

Well, it finally happened – we have hit 7% mortgage rates. On top of that, many lenders worry that mortgage delinquencies will increase due to impending recession. Depending on who you ask, we may already be *in* the recession.

While we haven’t seen a huge change in lending guidelines in recent months, I wouldn’t be surprised if some companies decrease their appetite for risk and tighten their lending requirements. We saw this happen at the beginning of the pandemic when some lenders increased their minimum required credit scores or reduced maximum allowable debt-to-income ratios. We’ll see how this plays out!

While buyers nationwide are getting gut-punched on the interest rate front, at least they may be able to get some reprieve on the price of a home. Based on data that compares median property values to median sales prices, October ends up being the month when buyers get the best deal.

In California specifically, January actually ends up being the best month for buyers, but the data for October through January is nearly identical. A combination of seasonality and high rates may allow buyers to snag a bargain that will likely vanish into thin air once interest rates reverse course. I still think summer 2023 (or possibly late spring) is when we see rates finally trend down.