Consumer Prices Rose 0.4% in October, Less Than Expected, as Inflation Eases while Purchase Applications Seen to Tick Higher Despite Growing Costs

Home Price Growth

Purchase Applications Tick Higher Despite Growing Costs

The number of mortgage applications generally decreased once again for the week ending November 4, according to the Mortgage Bankers Association (MBA). There was a slight uptick in purchase mortgage applications, reversing a six-week downward trend.

MBA’s Market Composite Index, which tracks the volume of all applications, fell by 0.1 percent more than a week earlier on a seasonally adjusted basis. At the same time, the Refinance Index dropped 4% and was 87% lower than it was during the same week last year. 

The seasonally adjusted Purchase Index increased by 1% from a week prior. Currently, the number of applications is 41% less than in the same week in 2021.

Average mortgage loan sizes increased to $368,100 from $357,900. Purchase loans increased from $394,900 to an average of $403,000 over the past week.

According to Joel Kan, MBA’s vice president, and deputy chief economist, in response to reports that the Federal Reserve will keep boosting short-term rates to combat high inflation, mortgage rates increased somewhat last week.

Early Indications Show September Home Prices Falling Less Than July/August

Home price indices (HPIs) for August were released by Case Shiller and the FHFA around two weeks ago. They both agreed that prices had fallen slightly more quickly than in July. For several reasons, the current state of home price changes is more intriguing than usual. First, it was only these past two months’ worth of HPIs that the statistics showed that prices had remained stagnant since this summer. Additionally, because Q3 is the final quarter of data required to determine a new conforming loan cap, July and August are crucial for this to occur.

An updated HPI is included in Black Knight’s Mortgage Monitor. According to this data, prices fell in September at a rate that was nearly half that of July and August. It’s not improbable that FHFA data, which will be released at the end of the month, would show a similar dip, given that Black Knight’s yearly appreciation level has dropped to 10.7%. Hypothetically, the FHFA price appreciation would drop to precisely 10.0% year over year if the ratios remained the same, and the new implied conforming loan ceiling would be at about $711,800.

Consumer Prices Rose 0.4% in October, Less Than Expected, as Inflation Eases

While inflation still threatens the U.S. economy, the consumer price index climbed less than predicted in October, suggesting that pressures may be beginning to ease. According to data released by the Bureau of Labor Statistics on Thursday, the index, a comprehensive gauge of prices for goods and services, rose 0.4% for the month and 7.7% from a year earlier. 

When volatile prices for food and energy are excluded, the so-called core CPI grew 0.3% for the month and 6.3% annually, above the corresponding estimates of 0.5% and 6.5%.

In October, workers received yet another pay reduction due to rising inflation. In a separate BLS press release, actual average hourly earnings showed a 0.1% monthly fall and a 2.8% annual decline.

Even if the inflation rate has slowed down, it still exceeds the Fed’s 2% target, and the report’s various sections suggest that the cost of living is still high. Inflation control is essential as we approach the holiday shopping season. According to a recent survey by Clever Real Estate, around one-third of Americans intend to reduce their spending this year due to rising costs.

Next week’s potential market-moving reports are:

  • Monday, November 14th – NY Fed 1-year Inflation Expectations
  • Tuesday, November 15th – Real Household Debt, Real Mortgage Debt 
  • Wednesday, November 16th – NAHB Home Builders’ Index, Business Inventories
  • Thursday, November 17th – Initial Jobless Claims, Building Permits, Housing Starts
  • Friday, November 18th – Existing Home Sales, Leading Economic Indicators

As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends. I welcome the opportunity to serve you in any way I possibly can. Please feel free to reach me at (800) 216-1047.

Related Post

Thriving Home Price Growth in Less Expensive Areas as Other Regions Moderate as MBA Nov. 2 Weekly Survey: Applications Fall 6th Straight Week

Home Price Growth in Less Expensive Areas

MBA Nov. 2 Weekly Survey: Applications Fall 6th Straight Week

Mortgage applications decreased for a sixth consecutive week, despite a slight decline in mortgage rates, according to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending Oct. 28.

On a seasonally adjusted basis, the Market Composite Index decreased by 0.5%, and the unadjusted refinance index rose by 0.2% from the previous week. From 28.2% of all applications, the refinance percentage of mortgage activity increased to 28%. At the same time, the seasonally adjusted Purchase Index fell by 1%.

FHA applications dropped from 13.9% the week before to 13.5%. The percentage of VA applications dropped from 10.7% of all applications the previous week to 10.3% this week. The USDA’s portion of all applications stayed at 0.5% of the prior week.

The 30-year fixed rate decreased for the first time in over two months to 7.06% but remained close to its highest since 2002,” said Joel Kan, MBA Vice President and Deputy Chief Economist. “Apart from the ARM loan rate, rates for all other loan types were more than three percentage points higher than they were a year ago. These elevated rates continue to put pressure on both purchase and refinance activity and have added to the ongoing affordability challenges impacting the broader housing market, as seen in the deteriorating trends in housing starts and home sales.

Kan added that refinance applications ran more than 80% behind last year’s rate, although most homeowners had locked in much-reduced rates. He said the refinancing proportion of applications was 28.6%, the seventh consecutive week where it fell below 30%.

CoreLogic: Thriving Home Price Growth in Less Expensive Areas as Other Regions Moderate

Even though home sales and the number of purchase mortgages continued their months-long declines in September, annual home price increases remained in the double digits. Compared to the same month in 2021, the CoreLogic Home Price Index (HPI), the first look each month at prices from the previous two months, increased by 11.4% this year. Even if mortgage rates are rising, appreciation is still substantial but has significantly decreased from the annual pace of 20.9% that it was in both March and April.

In July, month-to-month variations became negative. The growth rate dropped from August to September by 0.5%.

Homebuyer enthusiasm for properties in relatively cheaper places is probably being fueled by home prices in more expensive states on the West Coast and Northeast. According to CoreLogic, the states in the Southeast may benefit from this out-migration. Florida has led the country in home price growth for eight straight months. 

Additionally, CoreLogic projects the direction of price growth over the next year. According to the HPI, annual home price growth in the United States will continue to decelerate over the following 12 months, reaching 3.9% by September 2023, and prices won’t change between September and October 2022.

Next week’s potential market-moving reports are:

  • Monday, November 7th – Consumer Credit
  • Tuesday, November 8th – NFIB Small Business Index 
  • Wednesday, November 9th – No Report
  • Thursday, November 10th – Initial Jobless Claims, Continuing Jobless Claims, Federal Budget
  • Friday, November 11th – Consumer Sentiment

As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends. I welcome the opportunity to serve you in any way I possibly can. Please feel free to reach me at (800) 216-1047.

Related Post

Two top home price indices reported that home prices dropped significantly again in August, Landlords are being forced to pull back on significant increases due to a sudden drop in tenant demand US Economy Likely To Enter Recession in 2023

Home Sale Or rent

Home Prices Fell Even Faster in August, But Still Up Big Year-Over-Year

The two top home price indices reported that home prices dropped significantly again in August. The Federal Housing Finance Agency (FHFA) reported a fall of 0.7% – a slight increase from the 0.6% decline in July. The S&P Case Shiller 20 city index also reports a decrease of 1.3% from 0.7% in the previous month.

Does this imply that prices are dropping? In theory, absolutely. A home that sold for $397k in June would have sold for about $392k in August, citing FHFA as an example. In addition, the change from gains to losses has been extremely rapid. 

Even while year-over-year growth is less than it was a few months ago, it is still relatively encouraging. Home prices are normally monitored in terms of actual year-over-year changes, despite the rapid shift in the monthly direction. In essence, the house that sold for $392k in August of this year would have sold for about $350k in August of the prior year. This represents a 12% change from year to year. It is likely that the 12% figure will drop further in the upcoming months. What creates part of the challenge of looking at these numbers is that rising prices in the past will be used to compare pricing in the coming months. The market is behaving very differently right now, so it is difficult to compare numbers from year to year.

Mortgage Rates Will Fall To 5.4% As US Economy Likely To Enter Recession in 2023

As stated by the Mortgage Bankers Association, mortgage rates could decrease to 5.4% by the end of next year since the Federal Reserve’s aggressive interest rate increases will cause the US economy to enter a recession. This is an educated guess, and nothing is close to a guarantee. Interest rate predictions from the MBA, Fannie Mae, and even the National Association of Realtors have been – not even close to accurate for over 12 months. With all of the possible events that could impact rates, predicting their future has never been more difficult.

The US housing market is already beginning to feel the effects of the Fed’s aggressive battle against inflation, as mortgage applications reached their lowest level since 1997. Home sales have also been affected, with existing home sales falling 24% in September.

Renters Hit Breaking Point in a Sudden Reversal for Landlords

America’s tenants have had it with record-high housing costs and rising expenditures for everything from food to energy. Due to a sudden drop in tenant demand, landlords are being forced to pull back on significant increases. In many areas of the US, rent increases are slowing, causing an end to a years-long boom that has made housing unaffordable from across the country.

Instead of moving out on their own, young individuals who may do so are staying with their parents or sharing apartments with several other people.

Next week’s potential market-moving reports are:

  • Monday, October 31st – Chicago PMI
  • Tuesday, November 1st – Jobs Openings, Quits, Construction Spending 
  • Wednesday, November 2nd – FOMC Announcement, Fed Chair Jerome Powell Press Conference
  • Thursday, November 3rd – Initial Jobless Claims, Continuing Jobless Claims
  • Friday, November 4th – Unemployment Rate, Average Hourly Earnings

As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends. I welcome the opportunity to serve you in any way I possibly can. Please feel free to reach me at (800) 216-1047.

Related Post