Yields on the benchmark 10-year Treasury note rose again over the past week as investors weigh the Federal Reserve's next move. Mid-week, the Bureau of Labor Statistics (BLS) released its Job Openings and Labor Turnover (JOLTs) report which showed job openings were one million shy of expectation. The JOLTs report is closely watched by the Fed which has been leaning on a strong labor market as a way to prop up its hawkish stance on interest rates. 

When the labor market is as tight as it has been, that drives more inflation because wages rise sharply to meet intense demand for workers. Both the JOLTs report and the September jobs report showed slowing job growth with just 263,000 non-farm payroll jobs added in September according to the BLS. Economists surveyed by Dow Jones expected 275,000 jobs to be added. The unemployment rate came in at 3.5% versus the expectation of 3.7%. Wages showed 5% growth year-over-year which looks good on the surface, but has been offset greatly by rampant inflation. 

This jobs report data supports the idea that it is more than likely the Fed will implement another 75 basis point rate hike (its sixth rate hike of the year) at its next policy meeting held November 1-2. That would push the top end of the federal funds rate over 4%—levels not seen since the Great Recession. What the Fed is essentially trying to do is slow down the economy just enough so that inflation calms down but not be so aggressive that the economy gets tipped into a true recession. The U.S. economy did enter a technical recession earlier this year after a second consecutive quarter of negative gross domestic product growth. 

Dow futures fell the morning of the jobs report release while 10-year Treasury note yields started inching over 3.9% in pre-trading. As the 10-year yields rise, mortgage interest rates will follow suit. 

It seems ever so appropriate that the first 30-year fixed-rate mortgage average from Freddie Mac for the month of October came in at—wait for it— 6.66%. We wish we were making that up. The silver lining (or bullet if you want to stick with the Halloween and spooky references) is that these high rates are causing demand to plummet which is helping lower home prices and create more stability in inventory. 

The Mortgage Bankers Association's associate vice president of economic and industry forecasting Joel Kan referenced just how distinct the slowdown in demand has been, saying, "Mortgage rates continued to climb last week, causing another pullback in overall application activity, which dropped to its slowest pace since 1997. The 30-year fixed rate hit 6.75 percent last week – the highest rate since 2006. The current rate has more than doubled over the past year and has increased 130 basis points in the past seven weeks alone."

On the home price front, Black Knight's Home Price Index (HPI) shows that median home prices fell 0.98% on a monthly basis in August. The report notes that, "July and August 2022 mark the largest single-month price declines seen since January 2009 and rank among the eight largest on record." July's HPI index was revised higher to show a 1.05% monthly decline in home prices.