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The June inflation report added another wrinkle to the housing market. With consumer prices rising faster than expected, the Federal Reserve is unlikely to cut rates at its next meeting. That decision could keep mortgage rates higher for longer, slowing buyer demand, maintaining elevated inventory, and placing downward pressure on home prices.
For buyers, this environment offers an opportunity. For sellers, it’s a more challenging market to navigate.
Inflation Ticks Higher
The Consumer Price Index (CPI) rose 0.3% in June, bringing the annual inflation rate to 2.7%—a clear uptick from May’s 2.4%. Core CPI, which excludes volatile food and energy prices, rose 0.2% for the month and 2.9% year-over-year.
The increase was primarily driven by rising shelter costs and gasoline prices, with tariffs beginning to be reflected in the prices of consumer goods, such as clothing and furniture. While inflation remains well below its 2022 peak, it’s not cooling quickly enough to give the Fed confidence that price stability is fully restored.
What the Fed Is Likely to Do
The Fed has made clear it wants “greater confidence” that inflation is moving sustainably toward its 2% target before cutting rates.
- No rate cut in July: The federal funds rate is expected to remain at 4.25–4.50% at the July 29–30 meeting.
- September is now the earliest possible cut: Traders who were betting on a summer rate cut are now pricing in a later timeline.
The Fed will be cautious about cutting too early, fearing that easing too soon could reignite price pressures.
How This Impacts Mortgage Rates
Mortgage rates are tied to bond yields, which fluctuate in anticipation of the Fed’s policy.
- With no immediate cut, mortgage rates are likely to remain elevated, staying in the 6–7% range through the summer.
- A delayed rate cut pushes back hopes for more affordable borrowing in the housing market.
- Buyers waiting for rates to drop significantly may be waiting until late 2025.
Inventory Is Backing Up
Higher borrowing costs continue to suppress buyer activity, allowing inventory to build:
- Listings are creeping back to 2019 levels after years of severe shortages.
- Homes are staying on the market longer, with fewer multiple-offer situations.
- Price reductions are increasing—about 37% of active listings saw cuts in June, approaching pre-pandemic norms.
This dynamic is giving buyers more negotiating power, but it is forcing sellers to reset expectations.
What This Means for Buyers vs. Sellers
Buyers Benefit From:
- More choices: Rising inventory means more options and less competition.
- Negotiating leverage: Fewer bidding wars allow buyers to push for price reductions or seller concessions.
- Time to shop: Homes are sitting on the market longer, reducing the urgency to act immediately.
Sellers Face Challenges:
- Downward pricing pressure: Higher inventory and slower demand force sellers to cut prices or offer incentives.
- Longer days on market: The pricing power sellers enjoyed during the pandemic has faded.
- Uncertainty about timing: Those holding out for lower mortgage rates may find themselves waiting months, not weeks.
The Bottom Line
The latest CPI report reinforces the Fed’s cautious stance, delaying any meaningful relief in mortgage rates. This environment favors buyers, who gain leverage as inventory builds and price growth stalls. For sellers, the message is clear: pricing strategically is critical in a market where buyers hold the upper hand.
