The Federal Reserve (Fed) on Wednesday did something it hadn't done in more than two decades: it raised the federal funds rate by 75 basis points, to 1.50-1.75%, a hike not seen since 1994.

Last Friday, when the inflation print came out, the market shifted its expectations around how aggressive the Fed would be this week: consensus average was on a 50-bps hike before but increased to 75 bps.

Mortgage rates jumped as a result, with 30-year fixed rates reaching above 6% this week. Just before the Fed’s decision, mortgage applications increased 6.6% from the prior week, according to the latest Mortgage Bankers Association survey for the week ending June 10.

“Mortgage rates going forward will continue to be responsive to changes in expectations around the Fed’s policy path, as well as inflation expectations,”

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Some are predicting a drastic showdown in the real estate market as a result of continual rate increases this year. We expect that, for the remainder of 2022 in the DC real estate market, there will be a ‘step down’ effect rather than a serious slowdown, with non-cash buyers shifting down a step in price-point to offset higher rates.