Inflation: No Surprises, Yet
This week, inflation hit its mark causing little stir in mortgage rates. Despite the Consumer Price Index dipping to its lowest since April 2021, housing costs and used car and gas prices showed a sturdy climb. As investors play Sherlock with the banking sector, all eyes are on the Fed's future monetary maneuvers.
⭐️ Check This Out
- The FHFA finally ditched a fee that was about as popular as a root canal, proving that even regulators can't resist the sweet siren song of the Mortgage Bankers Association.
- Houses are playing hard-to-get, hanging around 17 days longer, but hey, at least their prices aren't skyrocketing as much as last year.
- Mortgage points became the new 'it' accessory in 2022, with 45% of borrowers rocking them to score lower payments.
- Raise your hand if you like rate hikes, housing shortages and regulatory costs; didn't think so. Lawrence Yun from NAR agrees with you.
- Inflation's on a roller coaster, with grocery prices and hotel fares getting the memo to chill, but apartment rents are that one friend who can't take a hint.
📊 Market Update
All eyes were on the inflation figures this week, with investors holding their breath. Turns out, they could have exhaled - the numbers were on target and mortgage rates barely fluttered.
Last month's Consumer Price Index (CPI) stood tall at 4.9%, a smidgen less than the previous month's 5.0%. This is the lowest we've seen since April 2021, a far cry from the heady heights of 9.1% back in June 2022. We're still leagues away from the early 2021 figure of 2.0%, which the Fed has longed for.
Predictably, most categories held their hands up with decent price increases. Housing costs, the repeat offenders, once again took the lion's share of the inflation pie. Used cars and gas prices joined the party too, showing a healthy hike from March. Food prices, though, decided to take the month off and stayed steady.
On the mortgage front, we've seen a bit of movement after a 25-year low. Purchase applications decided to make a 5% dash upwards from last week but are still trailing by 32% compared to last year. Refinance applications jumped by 10% from last week but are down by a hefty 44% from a year ago.
This week, investors will be playing detective with the banking sector, hunting for signs of trouble seeping into other institutions. They'll also be eagerly awaiting any juicy tidbits from Fed officials on future monetary plans.
The Persistent Rise in Housing Costs
The journey of the housing market from 2022 to 2023 has been quite a rollercoaster. In 2022, house prices leaped a remarkable 19.4% from February to February, thanks to a shrinkage in housing supply rather than a demand explosion. This saw every local market's prices skyrocket, with many boasting a rise of over 60%.
2023 introduced a plot twist. An upswing in mortgage rates gave some potential homeowners cold feet, putting the brakes on the housing boom we'd been seeing. Even though the median price for existing homes took a modest 0.9% dip in March compared to last year, the market stayed unpredictable, courtesy of high mortgage rates, the specter of continued inflation, and potential economic hiccups.
A prime suspect in the case of high housing costs? A severe shortage of housing inventory, which is currently languishing at a whopping 46% below the historical average from way back in 1999.
The housing market's twists and turns between 2022 and 2023 have been nothing short of dramatic. A reduction in housing supply, coupled with fluctuating mortgage rates, inflation concerns, and economic uncertainty have contributed to a volatile market. As we move forward, monitoring the housing inventory and other key factors will be crucial in understanding the future trajectory of the housing market and its impact on buyers and sellers alike.
🗓️ Economic Calendar
Tuesday
- Retail Sales - measures the change in the total value of sales at the retail level.
Wednesday
- Housing Starts - measures the change in the annualized number of new residential buildings that began construction during the reported month.
Thursday
- Initial Jobless Claims - measures the number of individuals who filed for unemployment insurance for the first time during the past week.
- Existing Home Sales - measures the change in the annualized number of existing residential buildings that were sold during the previous month.
Friday
- Fed Chair Powell Speaks - when this man talks, the markets listen.