Inflation, Home Price Growth Headed Downward: Fed Report
According to the most recent Survey of Consumer Expectations (SCE) from the Federal Reserve inflation is predicted to continue “to decline across all horizons” over the coming year while home price growth is also predicted to decline “sharply” to the lowest level since July 2020.
The August SCE survey reports that the median one-year inflation outlook decreased from 6.2% in July to 5.7%. The median estimate for home price growth decreased by 1.4 percentage points from July to August, falling to 2.1%, the lowest SCE reading since July 2020.
Even so, he ome prices during thyear’s second quarter hit a high peak, despite the gloomy predictions for the housing market as we approach the third quarter of 2022. According to the Federal Reserve Bank of St. Louis, average home prices increased dramatically in the second quarter of this year, rising to $525,000 from $440,600 for the same time in 2021. According to the research, the median sales price in the second quarter of this year was $440,300, up from the second quarter of last year’s median sales price of $382,600.
Inflation Rose 0.1% In August Even with Sharp Drop In Gas Prices
Based on the Bureau of Labor Statistics, inflation increased more than anticipated in August as rising housing and food prices partially offset a decline in gas prices.
The consumer price index, which measures the cost of a wide range of goods and services, rose 0.1% in the month and 8.3% in the previous 12 months. When volatile prices for food and energy were excluded, the CPI increased 0.6% from July and 6.3% in the same month in 2021.
For the month,energy costs decreased by 5%, with the gasoline index falling by 10.6%. However, other increases more than countered those reductions.
In August, the food index rose by 0.8%, while the cost of housing, which accounts for nearly one-third of the CPI’s weighting, increased by 0.7% and is now up 6.2% from a year earlier.
Medical care services also experienced significant growth, increasing by 5.6% from August 2021 and 0.8% monthly. Prices for new cars increased by 0.8%, while those for used vehicles decreased by 0.1%.
Following the news, the stock market had its worst single trading day since June 2020. The market dropped almost 1,300 points in the session.
The August data also contained some positive news for employees, with real average hourly wages increasing by a seasonally adjusted 0.2% for the month. They were still 2.8% lower than they were a year earlier.
The Federal Reserve has increased interest rates four times this year for a total increase of 2.25 percentage points to fight the overall rise in the cost of living. The central bank wants to control inflation without wrecking the economy; therefore, Tuesday’s report is anticipated to have more impact through the remainder of the year and into 2023 than on the September meeting.
The Current State of Refinancing
“Higher mortgage rates have pushed refinance activity down more than 80 percent from last year and have contributed to more home buyers staying on the sidelines. Government loans, which tend to be favored by first-time buyers, bucked this trend and increased over the week, driven mainly by VA and USDA lending activity.” –Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting.
Next week’s potential market-moving reports are:
- Monday, September 19 – NAHB Home Builders’ Index
- Tuesday, September 20 – Building Permits, Housing Starts
- Wednesday, September 21 – Existing Home Sales, Federal Reserve Statement
- Thursday, September 22 – Initial Jobless Claims, Construction Spending,
- Friday, September 23 – No Report
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.