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.