Hi Friends, Mortgage rates have stabil- ized and are slowly heading lower due to the continued good news on inflation. The Fed’s favorite measure of inflation, Personal Consumption Expenditures (PCE), showed that inflation rose 0.1% in November and 5.5% year over year. The core rate, which strips out food and energy prices and is what the Fed is more focused on, rose 0.2% and 4.7% year over year, which is lower than the 5% seen in the previous report.
Inflation trending lower is good for the markets, as the Fed wants core PCE to reach 2%. We are starting to see a nice improvement from the peak of 5.4% in February 2022 and the anticipation is for this to gradually continue to move lower as more reporting comes out this year.
The headline number peaked at 7% in June 2022 and has now moved to 5.5%, a 1.5% decline. We could see more meaningful drops in January/ February 2023, but the real move lower will likely happen in May 2023, with June of 2023 being my target for mortgage rates to fall below 5% APR again.
The Producer Price Index (PPI), which measures wholesale inflation, was reported for the month of
December 2023. The headline PPI figure was down 0.5%, which was below expectations of a 0.1% decline. On a year over year basis PPI decreased by 1.1% from 7.3% to 6.2%, which was lower than the 6.8% estimate. Core PPI, which strips out food and energy prices, increased by 0.1%, which was in line with expecta tions. Year over year Core PPI decreased by 0.7% to 5.5%, which was below the 5.7% estimate.
Lowering inflation directly reduces mortgage interest rates, which spurs more activity in both the mortgage
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If you have taken out a new mortgage in the last year, it’s time to check in to start planning for a refinance sometime after June of 2023 to capture the lower interest rates. If you are sitting on the fence to make a purchase, now is the time to get in while prices are still lower than they were the past 2 -3 years and then refinance once the rates drop later this year.
Feel free to reach out to me for a free consultation to explore these options in more detail.