It's a heavier tape to start the week. Treasury yields pushed to their highest level in over a year and a half as fresh fighting between the U.S. and Iran sent oil prices sharply higher, and hawkish Fed commentary from Friday is still working its way through rate expectations. Separately, Fannie Mae's latest expert survey offers a useful reminder for clients focused only on rate: home price appreciation is still a meaningful part of the equation.
01What happened
Bond pricing worsened to start the week as Treasury yields pushed higher. The 10-year yield — the benchmark mortgage rates track most closely — topped 4.75% Monday, its highest level since January 2025. Two forces are driving it: renewed fighting in the Middle East and a hawkish signal from the Fed's chair on Friday.
Overnight, U.S. forces struck Iranian targets on Larak Island in the Strait of Hormuz for the first time in weeks, and Iran retaliated with missile and drone strikes on U.S.-linked bases in Jordan. It's the first exchange of fire between the two sides in over a month, and it pushed oil prices sharply higher on renewed supply-disruption fears.
02Why it moved rates
Higher oil prices matter for rates because they feed inflation, and inflation is exactly what Fed Chair Kevin Warsh flagged in his Jackson Hole remarks on Friday. Warsh said recent inflation readings, while better than feared, don't yet show a meaningful improvement in the underlying trend, and reaffirmed the Fed's commitment to getting inflation back to its 2% target — language markets read as a willingness to hike if that trend doesn't turn.
Yields have climbed for three straight sessions, culminating in Monday's push above 4.75% — the highest level in over a year and a half.
Futures markets have taken notice. The odds of a 25-basis-point hike at the Fed's September meeting jumped to roughly 57%, up sharply from about 40% a week ago. That's a meaningful shift in tone from earlier this summer, when markets were largely debating the timing of the next cut.
Two escalating stories — a reignited conflict abroad and a Fed chair unwilling to declare victory on inflation — are compounding each other in the bond market right now.
None of this is happening in isolation. Attention now turns to this week's jobs data, which will help clarify whether the labor market is cooling enough to offset the inflation risk Warsh flagged.
03The other story this week: home price growth
Away from the day-to-day noise, Fannie Mae released its quarterly Home Price Expectations Survey (HPES) — a poll of more than 100 housing economists forecasting national home price growth over the next several years. The panel's latest median forecast puts 2026 growth at 2.5%, with 2.2% in 2027 and 2.7% in 2028.
Applied to a $500,000 home, a 2.5% gain this year works out to roughly $12,500 in appreciation — a real number worth putting in front of clients who are focused solely on rate. Real estate is local, so actual results will vary by market, but the broader point holds: the panel continues to expect steady, positive price growth rather than a downturn.
04What to watch this week
Jobs data dominates the calendar and will be closely watched given the shift in Fed rate-hike odds:
Tuesday: JOLTS job openings (July) — the prior reading was 7.4 million, largely unchanged.
Wednesday: ADP private payrolls — consensus is in the mid-40,000s, plus weekly mortgage application data.
Thursday: Weekly jobless claims.
Friday: The August BLS jobs report — the headline release for the week, alongside the unemployment rate.
A weaker set of numbers could ease some of the inflation pressure pushing yields higher; a stronger-than-expected report would likely reinforce the case for a September hike.
Rates are worse to start the week on a combination of geopolitical risk and inflation caution from the Fed — a backdrop worth being upfront with clients about. At the same time, the longer-term home price data is a genuine reason for optimism for anyone waiting on the sidelines: prices are still expected to grow, not fall. The right move for any individual borrower — locking now, waiting, or restructuring a purchase — is still a conversation for a licensed loan officer, since timing and personal circumstances matter more than any single week's headlines.