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Inflation has held up faster than expected in November, increasing the likelihood that the Federal Reserve will slow the pace of interest rate increases.
This is good news for the real estate market, which has suffered greatly from the impact of rate hikes over the past nine months.
The consumer price index rose 0.1% in November from October and 7.1% year over year, according to the Bureau of Labor Statistics.
CPI rose 7.7% from the previous 12 months in October and economists expected price growth in November to post 0.3% month on month and 7.3% annually.
With food prices jumping 12% and energy costs 13.1% compared to the same period last year, the central bankers are not looking at these figures well because they are flexible and do not reflect the power of the economy.
Excluding food and energy prices, the so-called core CPI rose 0.2% from the previous month and 6% year-on-year. Price increases for used cars and trucks fell 3.3% from a year ago, suggesting supply-side issues may be easing.
Labor costs, which keep pace with rising wages, remain strong, in part due to a rapid increase in rents, which rose 7.9% every year.
Al Otero, portfolio manager at Armada ETF Advisors, said the housing component of the CPI continues to be the main driver of the headline increase as home prices have fallen and mortgage lending is not reflected. in detail with the data that it is unlikely to be a tailwind until early 2023.
Although it is too early to call for a ‘pivot’ diet with annual rates still at 7.1%, the market is looking ahead and will begin pricing in numbers before it happens, from to do, Otero added.
The central bank raised interest rates at the fastest pace in decades in 2022, pushing them to a range of 4.25% to 4.5% from zero earlier this year.
Although the Fed has raised interest rates by 75 basis points four times in a row, the central bank – which will announce its action on Wednesday – may increase the pace of interest rate increases given the CPI is lower than expected. Real estate market watchers are taking a closer look.
The Fed is expected to pause rate hikes but not stop this month, said Logan Mohtashami, senior analyst at HousingWire.
Mohtashami also said that the Federal Reserve has made sure to let the market know how much money is left in the stock market.
Today’s CPI data will close the deal for a 0.50% increase as the Fed tells the market that the pace of inflation will slow.
Headline inflation has fallen for a year after peaking at 9.1% in June, suggesting that inflation is slowing as the Fed’s struggle to curb inflation – and turn the housing market back on track – began in March.
Defending against the Fed’s aggressive behavior is a tough job market. Employers added 263,000 jobs in November, with the unemployment rate holding steady at 3.7%.
Mortgage rates have declined after hitting their most recent high about a month ago at 7.16%. On Monday, the 30-year fixed mortgage rate was 6.44%, according to the HousingWire Mortgage Rates Center.
Scott Happ, president of Optimal Blue, a division of Black Knight, said that the spread between the mortgage rate and the 10-year Treasury yield decreased 13 points during the month to 283 basis points, a sign that investors and those Borrowers may be looking to increase the effect of the lower number.
However, the rate cut is not enough to stimulate the housing market, which is also suffering from the effects of falling demand and low prices, as well as falling prices that have not fallen enough to attract buyers even if the market is out of bed.
Dollar volume fell 21.5% in November from the previous month, the lowest level since February 2019, according to data from Black Knight.
The overall foreclosure volume is down 39% over the past three months and down 68% from last year’s level, showing how the housing market has fallen in 2021 is high.
Happ said inventory and foreclosure rates are nearly double what they were a year ago and have combined to offset the recent gains in home prices and declining rates from an energy perspective.
Reference Source: Housing Wire
