John’s Finance Corner: Inflation Progress and Housing Market Dynamics
I closely monitor the economic indicators that influence the housing market and mortgage rates. Last week’s reports on inflation and homebuilder confidence provided some noteworthy insights:
Inflation Shows Signs of Easing: The Consumer Price Index (CPI) for July indicated a rise of 2.9% over the past 12 months, marking a deceleration from June’s 3% annual gain. This is the first time since March 2021 that the CPI has dipped below 3%. The main contributors to this inflationary pressure were shelter costs and motor vehicle insurance, while other significant categories like energy and transportation saw stable or declining prices.
Wholesale Inflation Also Subsides: The Producer Price Index (PPI) for July came in lower than anticipated. The headline PPI increased by a modest 0.1%, with the nnual rate dropping from 2.7% to 2.2%. The Core PPI, which excludes food and energy, remained unchanged for the month, and the year-over-year figure fell from 3% to 2.4%.
Homebuilder Confidence Wanes: According to the National Association of Home Builders, confidence among homebuilders has declined for the fourth consecutive month, reaching its lowest point since last December. This sentiment is due to the impact of higher rates on material and labor costs. However, as inflation eases and interest rates improve, builder confidence is expected to recover. Meanwhile, housing starts and permits both decreased in July, with single-family starts dropping by 14% and permits by 4%, suggesting a tighter housing supply and potentially higher home prices ahead.
Retail Sales and Job Market: Retail sales experienced a significant increase of 1% in July, exceeding expectations and influencing treasury bonds and mortgage rates. Additionally, both initial jobless claims and continuing claims saw decreases, further affecting the rates.
Anticipated Federal Reserve Meeting: This week, all eyes are on the Federal Reserve meeting in Jackson Hole, Wyoming, where future policy will be discussed. Fed Chair Powell’s remarks on Friday are highly anticipated, especially considering expected job number revisions from the Bureau of Labor Statistics. A downward revision by as much as 600,000 to 1,000,000 jobs could trigger a bond rally, potentially lowering mortgage rates and reinforcing the likelihood of a Fed Fund Rate cut on September 18th.
Stay tuned for updates as these developments unfold and their implications for the housing market and mortgage rates.
For those navigating the housing market, understanding these economic trends is crucial. If you have any questions or need assistance with your mortgage options, please reach out for expert guidance.
John Lamberg
Senior Loan Officer
Mobile 727.366.9947
Website ccm.com/john-lamberg
Email [email protected]
