Mortgage rates improved but just by a tiny bit last week, according to the weekly survey of average rates released by Freddie Mac. The economy remains strong, and inflation has eased, but there are concerns by economists that inflation may be headed up again, thanks to rising oil prices.
If you’ve been to the pump lately or even bought a plane ticket, you’ve likely noticed higher prices. The price of oil has been rising due to lower supply and production cuts by Saudi Arabia and Russia. The price of jet fuel and diesel has spiked. And since much of our food supply is moved and produced using diesel, we could see food costs moving higher in the near future.
As we know, inflation is the enemy of bonds, and when inflation rises, it’s likely to see increases in mortgage rates. Interestingly we’ll get a look at Consumer Prices this week when the CPI (consumer price index) is released.
Core prices in August are expected to hold steady and modest at a monthly increase of 0.2 percent to match July’s as-expected 0.2 percent increase. Yet overall prices, reflecting food and energy, are expected to rise 0.6 percent after July’s 0.2 percent increase which was also as expected. Annual rates, which in July were 3.2 percent overall and 4.7 percent for the core, are expected at 3.6 and 4.3 percent, respectively.
The CPI report is the last of five major economic reports the Fed will be watching to help them decide whether to raise rates or not in their next meeting. That being said, it’s a highly impactful report. As of now, analysts think there’s only a very small chance of a Fed rate hike in September, but the chance increases for later in the year
So, the combination of increased oil prices and their effect on inflation at large, the chances of any outsized improvement in mortgage rates are not all that probable at this point.
We’ll also get a look at wholesale price inflation this week as the Producer Price Index is released. Producer prices in August are expected to rise 0.4 percent in the month versus a 0.3 percent increase in July. The annual rate in August is seen at 1.3 percent versus July’s 0.8 percent rate.
As for the housing market, the inventory of listings on the market remains low, hampering plentiful home buyers. However, according to Zillow, new listings on the market rose by 4 percent for the month, offering a glimmer of relief in the issue of not enough homes on the market for buyers to buy. So, although not resolved, hopefully, this move will continue in the right direction.
If you are interested in considering a move, reach out to me, and let’s explore your home financing options. I’m always here to help!
