Mortgage Rates Trending Down as Fed Predicted to Raise Its Rate

Concerns over lackluster economic growth allowed the trend for mortgage rates to continue to improve for the fourth consecutive week. According to Freddie Mac’s latest survey, it’s been since 2008 that rates have seen the decline we’ve seen over the last four weeks!

Increased buyer activity has not shown up in the numbers yet, however, this time of year is typically quieter than much of the rest of the year. Many of the analysts I watch are expecting an uptick in housing market activity in the coming weeks and months if rates continue this trend.

Supporting a lower trend in rates is the latest inflation data out this week. November’s Consumer Price Index (CPI) showed annual inflation at 7.1 percent, down from 7.7 percent in October. The indexes for energy, gasoline, natural gas, and electricity are down too, hopefully allowing for more cash in the pockets of holiday shoppers.

Also happening this week is the final Fed Meeting of the year. Chairman Powell has indicated that a .50 percent increase in their Fed Funds Rate is likely. We’ll know for sure when the Fed adjourns on Wednesday. If so, the Fed’s rate would be at a 15-year high marking the fastest increase in the history of the Fed. 

As for what else I’m watching, the numbers for Retail Sales come out later in the week. They are expected to fall 0.2 percent in November following October’s higher-than-expected 1.3 percent rise.

And speaking of consumers, the latest survey on consumer expectations reveals that consumers are becoming more confident that inflation will calm down. They are expecting their earnings to grow for next year by 2.8 percent after the median growth in household income rose 0.2 percent to 4.5 percent for the year. 

As for the housing market, I’m seeing data come together that, in addition to the rate trend mentioned above, look more favorable for buyers. For instance, the appreciation of home prices has slowed to 10.6 percent per year, down from 12.9 percent. Miami, Tampa, and Charlotte, NC reported the highest year-over-year gains.