Inflation Archives – Page 7 of 7 – Fred Gruber

What’s Ahead For Mortgage Rates This Week -March 17th, 2020 Last week’s scheduled economic reports included readings on inflation and consumer sentiment. Weekly readings on mortgage rates and new jobless claims were also released.

Inflation Holds Steady in February

The Consumer Price Index rose 0.10 percent in February and matched January’s reading. Analysts expected no inflationary growth for February and noted that the Coronavirus had not yet impacted national inflation.

Higher rents and grocery prices caused inflation to rise in February. Year-over-year, the Consumer Price Index rose 2.30 percent in February after posting its highest reading of 2.50 percent in January; analysts expect inflation to decrease in the coming months.

The Core Consumer Price Index, which excludes volatile food and energy sectors, grew by 0.20 percent and matched expectations and January’s growth rate.

Mortgage Rates Mixed as New Jobless Claims Fall

Freddie Mac reported that the average rate for 30-year fixed-rate mortgages rose seven basis points to 3.36 percent last week after posting the lowest rate on record the prior week. The average rate for 15-year fixed-rate mortgages fell two basis points to 2.77 percent.

The average rate for 5/1 adjustable rate mortgages dropped by 17 basis points to 3.01 percent. Discount points averaged 0.70 percent for fixed-rate mortgages and 0.20 percent for 5/1 adjustable rate mortgages.

New jobless claims fell to 211,000 claims filed from the prior week’s reading of 215,000 first-time claims filed. Consumer sentiment dropped to an index reading of 95.90 in March as compared to February’s reading of 101.00; analysts expected consumer sentiment to fall to an index reading of 95.00.

The March reading was the weakest in five months and was attributed to fears of the Coronavirus. The current consumer sentiment index covered data through March 11 and index readings are expected to fall lower as impacts of the Coronavirus unfold.

What’s Ahead

This week’s scheduled economic news includes readings from the National Association of Home Builders on housing market conditions, sales of pre-owned homes reported by the National Association of Realtors® and Commerce Department readings on housing starts and building permits issued.

The Federal Reserve will issue its post-meeting statement of its Federal Open Market Committee and Fed Chair Jerome Powell will give a press conference after the FOMC statement. Additional economic news and policy announcements related to the Coronavirus may also be released.

December Home Prices Rise According To S&P Case-Shiller Home Price Index Home prices rose slightly in December according to S&P Case-Shiller Home Price Indices released Tuesday. According to the S&P Case-Shiller 20-City Home Price Index, which covers cities representing all nine US Census divisions, home prices rose 5.40 percent year-over-year in December as compared to November’s reading of 5.20 percent.

December’s year-over-year home price increases were led by Portland Oregon at 11.40 percent, San Francisco, California at 10.30 percent and Denver, Colorado with a year-over-year reading of 10.20 percent. 10 cities reported higher home prices while eight cities reported lower home prices and year-over-year home prices were unchanged for two cities.

Year-over-year national home prices equaled winter 2007 home price levels, The S&P Case-Shiller 20-City Home Price Index has recovered by 36.30 percent since March 2012. Phoenix, Arizona posted its 12th consecutive month of home price gains for the longest streak of price gains in 2015.

Home Price Growth Surpasses Core Inflation Rate

David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, said that while home prices continue to rise, they are rising at a slower pace. All but one city (Washington, D.C.) posted home price gains higher than the core inflation rate of 2.20 percent. Home prices rising faster than inflation is positive for home sellers, but would-be-buyers may sit on the sidelines due to concerns about affordability. On the plus side, job markets are strong and mortgage rates remain low, which will likely encourage more first-time and moderate income buyers to enter the market.

S&P Case-Shiller Month-to-Month Readings

After seasonal adjustments, both the Case-Shiller 10 and 20 City home price indices posted a month-to-month gain of 0.80 percent. 19 of 20 cities posted month-to-month gains after seasonal adjustments. Factors contributing to higher home prices include high demand for homes coupled with a short supply of available homes. Home builders are ramping up construction, which should ease demand and help stabilize prices.

In related news, The National Association of Realtors reported that January sales of existing homes rose to 5.47 million sales on an annual basis as compared to expectations of 5.30 million sales and December’s reading of 5.45 million sales. January’s reading was 11 percent higher year-over-year and indicated that homes are selling in spite of rapidly rising prices in many areas.

Analysts said that the shortage of homes is causing an imbalance in market conditions; currently there is a four month supply of available homes as compared to an average six month supply of available homes. There have been only three instances when home supplies were lower in the past 16 years.