July's Consumer Price Index (CPI) saw the cost of shelter increase 0.4% in the month. Meanwhile, mortgage applications surged 16.8% last week from 6.9% the week prior. Mphasis Digital Risk founder and managing director Jeff Taylor joins Market Domination Overtime to discuss the state of the housing market and its trajectory as the Federal Reserve initiates interest rate cuts.

"What we saw in the refinance market was the biggest one-week jump in almost two years. And if we look at the broader [mortgage] rate market right now, we're down a full point to 6.5%, down from a high in April of 2024. And as the Fed has talked about over the course of the last couple of weeks, we're looking at potentially one to two rate cuts this year, maybe September, maybe December, maybe a total of 75 basis points," Taylor tells Julie Hyman and Josh Schafer.

"So for the first time in over two and a half years, I think that we're really starting to hit a spot here in a period of time where interest rates are going to come back down coupled with affordability getting a little bit better... Those things coming together are really going to shape up for what could be a good housing market in the rest of this year and in the spring buying season," he explains.

He notes that in a recent survey, Mphasis found that 48% of potential homebuyers are looking for a 5% rate in order to feel ready to purchase a home. He expects permanent mortgage rate cuts to come when the Federal Reserve cuts interest rates:

"If you look at September through December of this year, you could probably see triple the amount of refinance volume as you have in the previous two years on a monthly basis because, ahead of the Fed, the markets will move to MBS [mortgage-backed securities] and then mortgage rates will come down."

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This post was written by Melanie Riehl