John’s Finance Corner
Inflation, Housing Trends, and Mortgage Rates
Last week brought some critical updates for the economy, highlighting both challenges and opportunities. From inflation data to housing market rebounds, here’s my take on what it all means for mortgage rates moving forward.
Sticky Inflation Signals and Economic Slowdown
The Personal Consumption Expenditures (PCE) report, the Fed’s preferred measure of inflation, revealed some mixed results:
- The monthly headline PCE rose by 0.3%, in line with expectations, while the year-over-year reading came in at 2.5%.
- Core PCE, which excludes volatile food and energy prices, showed less favorable trends. It increased by 0.4% for the month and 2.8% annually—above the Fed’s target of 2%.
Looking ahead, achieving meaningful progress on lowering Core PCE could be challenging over the coming months due to the elevated baseline figures it will replace. With inflation proving sticky and record-high credit card debt combined with slower consumer spending, signs of an economic slowdown are emerging. This has fueled discussions about a potential recession on the horizon.
While recessions are never ideal, history shows that mortgage rates often decrease during such periods, providing a silver lining for borrowers.
Housing Market Rebounds in February
On a brighter note, February brought good news for the housing market:
- New home sales rose by 1.8% from January, and year-over-year sales increased by 5.1%.
- Existing home sales also climbed by 2% month-over-month, surpassing expectations.
These gains are encouraging, especially considering that many of these transactions were initiated during periods of higher mortgage rates. Increased inventory levels have played a role in bringing buyers back into the market, though housing supply remains low compared to pre-pandemic levels. With continued buyer demand and limited supply, home prices are likely to appreciate further this year.
What’s Ahead for Bonds and Rates?
After a rocky start, bonds and mortgage rates improved toward the end of last week. Investors seeking more security shifted funds from stocks to bonds, improving bond yields and contributing to slightly lower mortgage rates.
This week promises to be pivotal as we enter “jobs week.” If the upcoming labor market data reflects fewer job gains or a slight uptick in the unemployment rate, we could see further improvement in rates. Additionally, keep an eye on April 30th, when First Quarter GDP data is set to release. This could influence the Fed’s future policy decisions.
As always, staying informed about these trends is essential for navigating the mortgage market effectively. If you're ready to take the next step, whether it's buying a home, refinancing, or evaluating your options, I'm here to provide personalized guidance to help you achieve your goals.
John Lamberg
MORTGAGE LOAN ORIGINATOR
NMLS 189233
