Good news first…mortgage rates continued to improve last week; however, we saw some conflicting signals that are impacting rates:
The Fed: Higher for Longer, But Maybe Not Forever
The Federal Reserve met last week and surprised many by indicating they might not cut rates as much as previously expected. While they’re sticking to their plan to keep rates higher for now to control inflation, their longer-term outlook suggests these rates might come down eventually as the economy cools. The bummer is that instead of the 3 rate cuts expected, it’s looking like just one.
Inflation: A Cause for Concern
The Fed’s decision to maintain higher rates is partly due to their belief that inflation may not improve significantly this year. However, recent inflation reports for May actually came in lower than expected. Last week’s CPI (Consumer Price Index) reported a near-perfect inflation level (near 2 percent), but we’ll have to see if this continues.
Retail Sales: A Sign of Slowing?
Another factor influencing rates this week was weaker-than-expected retail sales data. This suggests a potential slowdown in the economy, which could ultimately lead to lower rates down the line.
The Bottom Line:
The near-term outlook for mortgage rates is uncertain. The Fed’s “higher for longer” stance could keep rates elevated for a while. However, a potential economic slowdown and lower inflation readings offer some hope for future rate cuts.
Looking Ahead:
There are only a few important economic reports this holiday-shortened week as we observe the Juneteenth holiday. However, the following week will bring key reports on housing, manufacturing, and consumer confidence, which could further impact rates.
On Thursday we get a look at New Housing Starts and Building Permits, a leading indicator for home sales. Housing starts in May are expected to rebound only slightly to a 1.37 million annual rate versus April’s much lower-than-expected 1.36 million rate. Permits, at 1.44 million in April and also lower than expected, are likewise seen rising modestly to a 1.45 million rate.
Friday’s report on Existing Home Sales is predicted to report that after April’s 4.14 and March’s 4.22 million annualized rates, existing home sales in May are expected to hold at a 4.10 million rate.
Here to Help You Navigate This Market
While the future of rates is always uncertain, I’m here to help you navigate the home buying process in this ever changing environment. With careful planning and the right mortgage option, you can still achieve your homeownership goals. Let’s chat to see what’s possible for you!
