How did the mortgage rate market react to new inflation data?

Positive inflation report | mortgage rate news

December metrics show inflation cooling further, markets react

After initial sideways action, most markets decided they liked the most recent Consumer Price Index data that showed inflation continuing to cool off. Inflation in December 2022 was only 6.5%, down from last year’s 7.1% and in-line with market estimates.

Consumer prices fell 0.1% in December 2022. That’s the biggest single month drop since April 2022. Core CPI increased 5.7%. This was also in-line with expectations.

The national average for a 30-year, fixed-rate mortgage ended the session down 0.08% at 6.07%. The current national average is at its lowest point in four months.

This could be a great time for home buyers that were staying on the sidelines to jump back into the market and lock in a mortgage rate.

What is the next market mover for housing & mortgages?

The latest inflation data is likely welcome news for most, but everyone should now shift their focus to the FOMC meeting at the end of the month. The Federal Reserve has maintained that their goal is a 2% inflation rate. We’re still a long way from getting there, and The Fed will likely continue rate increases until we do. Interest rates impact the bond market which, in turn, impacts mortgages.

Experts are predicting that the impact of The Fed on real estate will vary by market. Some are claiming that normally hot West Coast markets will cool off in 2023, while markets in the Sun Belt and on the East Coast will continue to hold up. As for the Midwest? Jeff Lowe, a broker at Compass in Chicago, stated that “The coasts fluctuate greatly, but the Midwest is just a different dynamic. We don’t see 10% to 15% increases or decreases annually. It’s a very steady market.”

Where are lumber prices at?

Lumber prices are a leading indicator of new home construction. The potentially good news is that lumber costs for 1,000 board feet of lumber are currently at pre-pandemic levels. At peak, the same amount of lumber was over $1,400. The current price is almost down to $350.

While new home construction has seen a bit of a slump in the past few months, lower prices could indicate that there may be an opportunity to start building again soon.

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