Fed PolicyMortgageMortgage Rates

Inflation, home price growth headed downward: Fed report

Still, the Federal Reserve' Federal Open Market Committee is expected to embrace another 75 basis-point rate bump at its upcoming September meeting

Inflation is expected to continue “to decline across all horizons” over the next year while home price growth, too, is projected to decline “sharply” to the lowest level since July 2020, according to the most recent Survey of Consumer Expectations (SCE) released by the Federal Reserve Bank of New York.

The median one-year inflation expectation, the August SCE report shows, fell to 5.7%, down from 6.2% in July. Median home-price growth expectations fell by 1.4 percentage points in August compared with July, to 2.1%, which is the lowest SCE reading since July 2020.

“The decline was broad-based across demographic groups and geographic regions,” the August SCE report states.  “Home-price expectations have now fallen by nearly two-thirds since the April 2022 reading of 6.0%.”

The SCE report is based on a nationally representative, internet-based survey of a rotating panel of some 1,300 heads of household. The report’s findings for August echo analysis of home-price data released in July by Black Knight Data & Analytics.

“Annual home-price growth shifted from deceleration to decline in July as the median home price fell 0.77% from June – the largest single-month decline since January 2011…,” Black Knight reported in its July Mortgage Monitor report. “Escalating declines in June and July have total tappable equity down 5% over the past two months, suggesting a sizeable reduction is likely in Q3, which would mark the first quarterly decline in three years.”

The Black Knight report notes that some of the most significant declines in tappable equity are occurring in equity-rich West Coast markets.

How will non-QM perform for the rest of 2022?

With inflation and rising rates, non-QM lending has spent the last few months in choppy waters, with some lenders closing their doors. However, the outlook for non-QM for the rest of 2022 is relatively optimistic, according to Acra Lending CEO Keith Lind.

Presented by: Acra Lending

“From April through July, San Jose lost 20% of its tappable equity,” Black Knight Data & Analytics President Ben Graboske said. “Seattle followed, shedding 18% of tappable equity over that same three-month span. 

“Likewise, San Diego (-14%), San Francisco (-14%) and Los Angeles (-10%) have all seen double-digit declines since April.”

The amount of tappable home equity nationally hit $11.5 trillion in the second quarter of this year — after accounting for homeowners retaining at least 20% equity, according to Black Knight.

“With prices continuing to correct and our … HELOC data showing home-equity lending at its highest level in 12 years, we will keep a very close eye on equity positions in the coming months,” Black Knight’s July Mortgage Monitor report states.

Goldman Sachs, in a recent white paper titled “The Housing Downturn: Further to Fall,” projects that new and existing home sales are expected to drop by 22% and 17%, respectively, in 2022. 

Still, despite the dour projections for the housing market ahead as we enter the third quarter of 2022, home prices through the second quarter of year reached a high plateau. Average home prices were up significantly in the second quarter of this year, to $525,000, compared with $440,600 for the same period in 2021, according to the Federal Reserve Bank of St. Louis. The median sales prices in the second quarter of this year was $440,300, compared with $382,600 for the second quarter of last year, the report shows. 

“Higher home pricing and mortgage rates continue to curb homebuyer demand,” states Mortgage Capital Trading in its September 12 daily market report. “Mortgage rates climbed from 3.1% for a 30-year fixed in June 2020 to 5.8% on June 23, 2022, based on Freddie Mac’s rate-survey data. 

“With a 3% down payment, this has pushed the average mortgage payment from roughly $1,900 to over $3,400 a month, taking home price and rate increases into consideration.”

Even if the inflation rate is finally moderating, however, don’t expect a break from the aggressive upward rate push by the Federal Reserve’s Federal Open Market Committee (FOMC) in its battle to stem rising inflation. Its next meeting is slated for September 20-21. 

A recent “Fed Chatterbox” report from investment bank Goldman Sach’s Economics Research unit states that “several participants suggested that the FOMC could hike [rates] by either 75 or 50 basis points in September.”

“Chair Powell noted that, following the two 75 basis-point hikes in June and July, ‘another unusually large increase could be appropriate’ at the September meeting,” the Goldman Sachs report continues. “Last week, the Wall Street Journal reported that the FOMC ‘appears to be on a path to raise interest rates by another 0.75 percentage point this month,’ a likely hint from the Fed leadership that a 75 basis-point hike is coming at the September meeting. 

“No FOMC participant has argued against delivering a 75 basis-point hike, and a few participants indicated that they preferred to frontload rate increases.”


  1. What is the the definition of “Tappable Equity” as the term is being used in this article? Does it mean a broad decline in value of properties in each of the west coast cities listed. I live in the SF bay area and I have not seen value declining. All purchase transactions I have lent on recently sold for above asking price even though multiple offers increasing rare. Properties have all appraised for price. Admittedly, the froth is gone but supply and demand remain badly out of balance.

    The “Tappable Equity” declines noted in this article seem extreme and I have not observed them in the real world.

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