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The Federal Treasury Increased the Federal Funds Rate By .75%. What Does that Mean to the Housing Market?

Thursday, July 28, 2022   /   by Jim Cherne

The Federal Treasury Increased the Federal Funds Rate By .75%. What Does that Mean to the Housing Market?

The Feds pulled out their big stick again and increased the federal funds rate by .75% for the second time in less than two months.  This hasn’t happened since 1994!  With runaway inflation, the government is using the few tools it has to control our economy, and increasing the federal fund rate is one of them.  Unfortunately, increasing the fund rate affects inflation indirectly by reducing borrowing power.  It doesn’t decrease the cost of gas or a bag of groceries.  We will feel the hurt before the help.


Mortgage rates have gone up from under 3% last year to over 6% earlier this year finally settling down to around 5% now.  Although 30 yr. fixed mortgages usually follow the 10 yr. treasury bond rate, we will probably see another roller coaster ride in rates from the latest increase in the Federal Fund Rate.


Here are some stats:



    • The Federal Fund Rate is now 2.25% to 2.50% - This is what is considered a neutral rate – neither to stimulate nor slow economic growth.  It was at near 0% during the pandemic.

    • The Prime should go to 4.75% so interest rates for us common people will go up as well.

    • The GDP shrank during the last two quarters of this year.  But because this is an election year and unemployment numbers are still low, most economists aren’t declaring a recession.

    • The number of single-family homes in Contra Costa County available for sale this month is 1345 that’s an 83.7% increase from July 2021.

    • The ave. sold price year to date has increased 8.9% compared to the same time period last year.

    • However, the ave. sold price so far in just July has decreased 2.4% compared to July of last year

    • Buyers were driven by low-interest rates, and the opportunity to work remotely.  But now they feel priced out of the market or reduced buying power due to interest rates.

    • The news media is going to paint a gloomy housing picture.  And in some parts of the nation, there will be a bit of truth.  But the Bay Area is always in a housing shortage because we have better-paying jobs and better weather, etc.


Today, the local housing market is shifting back to a normal state.  Inventory is increasing, and prices are stabilizing.  Unless that once-in-a-lifetime home comes on the market (Is that ocean cliff house with the killer view for sale?)  buyers have more time to see what’s on the market.  Sellers may find their home on the market longer and get fewer offers, but they should be solid offers.


This is the time when an experienced agent is more important than ever. 



    • Someone who’s been around before the pandemic when properties weren’t flying off the shelf.

    • Be sure your agent knows how to market your home using all the photography, video, drone tools, and social media marketing available.

    • An experienced agent that has the creativity to connect a buyer with the people to put a loan together or craft an offer that a seller is looking for. 

    • An experienced agent that can guide a seller to make the most economical improvements to sell for top dollar or show how you can buy your new home before you sell.


If you’re interested in knowing how we can help you with your housing needs or just want to hear how the market is doing, give us a call.  We’re here for you.


  buying a home, home buying, interest rates

J. Cherné Homes & Assoc.
Jill Cherne
601 Sycamore Valley Road
Danville, CA 94526
925-212-7783
DRE# 01731991
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