The Most Important News Report Of The Year Dropped Today!
The most important news report was today’s inflation data, as depicted in the Consumer Price Index (CPI) report.
It is extremely important for those of us in the mortgage and real estate industries because almost nothing drives interest rates more than inflation news.
And, as we all know, rates clearly drive both real estate and mortgage volume.
If CPI had come in higher than expected, rates would have shot through the roof. If it had come in lower than expected, rates would have plummeted (and hence, my subject line).
CPI, however, came in exactly as expected, but rates are still edging down because the market is digesting some confusing data.
And this is what the market is digesting: the only reason CPI did not come in lower than expected was because “shelter costs” were way up, and shelter costs make up a large portion of the CPI reading.
BUT – this makes no sense to analysts because HOME PRICES were DOWN 0.5% month-over-month, and RENTS were DOWN 0.8% month-over-month.
SO – there is no reason for “shelter costs” to be up… and the market is figuring that out, and that is why rates are edging down as I type this blog.
AND – but for this anomalous shelter cost reading, CPI would have been much lower than expected, and rates would have plummeted (and hence, my subject line once again).
Really Good News!
Today’s CPI report was very good news nonetheless.
CPI fell 0.1% month-over-month – in what was one of the fastest declines we have seen since April of 2020.
And, while the “Core Rate” is still up 5.7% year-over-year, the rate of increases is declining – exactly like Barry Habib and Jeff Snider have been predicting.
And – once again, they are predicting further declines.
Habib’s MBS Highway pointed out today that if inflation continues on the trend we have seen over the last three months, we will see less than 2% inflation over the next twelve months!
Long story short: It seems all but inevitable that inflation and rates will continue to fall this year – particularly after the confusing “shelter cost” data washes out over the next few months.
It was only a few months ago when a lot of analysts were predicting 8% rates in 2023. And – I suspect a lot of them are trying to delete their old tweets and IG posts right now…
Rates are again almost 1% LOWER than where they were in October – despite the Fed’s bluster and rate increases.
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