New inflation data released. What’s the impact on mortgage rates?

Man reviews monthly bills | mortgage rate news

How did the inflation metrics for January 2023 look?

Well, if you’ve been to a grocery store in the past month, a lot of the data released shouldn’t have come as a shock. The consumer price index for January 2023 came in at 6.4%, down slightly from December’s 6.5% mark, but still a bit higher than the initial projections.

The concern for the housing industry is that housing costs are still continuing to rise and outpace wages. Housing costs rose 0.7% month-over-month, and are up 7.9% from a year ago. Over the past three years, housing costs are up 43% while wages have only grown at 16%.

According to Bright MLS chief economist, Lisa Sturtevant, “Slowing demand in the housing market was part and parcel of the Fed’s strategy designed to cool consumer demand to bring down inflation, but as the cost of borrowing to purchase a home rises, it disproportionately impacts young, prospective first-time homebuyers and widens the already sizable wealth gap in the U.S.”

When asked about a prediction for the mortgage market after Tuesday’s inflation data, chief economist for the National Realtors Association, Lawrence Yun, said, “Mortgage rates could linger at around 6.5% for a few more months before heading below 6% by summer and maybe even 5.5% by the end of the year.”

How did mortgage rates react after the announcement?

The national average for a 30-year, fixed rate mortgage ended up 0.08% from yesterday, and currently sits at 6.62% *. There is additional housing data expecting to come out before the end of the week that could influence the mortgage market.

Could help from Washington be on the way for the housing market?

A recent report from The Hill detailed how housing advocates and homebuilders are trying to push President Biden into trying to expand affordable housing. Biden gave his State of the Union address last week, and barely mentioned housing during the speech. He chose to focus on lowering costs for families but didn’t speak specifically to housing. Biden attempted to secure $150 billion for affordable housing during the previous Congress but couldn’t get the complete Build Back Better package through the Senate.

With the mid-term election in the rearview mirror, several voices are pushing for Biden to make another push for affordable housing with the new Congress in session. This time, Biden may have an even tougher hill to climb with a Republican-controlled House of Representatives and a Democratic-controlled Senate. It remains to be seen if Biden can manage to unite the two houses of government on an issue that shouldn’t be partisan.

* National average rates accurate as of 2/14/23 and are not advertised rates from Guaranteed Rate.

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