Rates Essentially Unchanged, CPI Breaks Key Psychological Barrier
Mortgage rates increased 2 basis points from last week, according to the Freddie Mac Primary Mortgage Market Survey released August 15th. While rates increased slightly this week, they remain more than half a percent lower than the same time last year. In October 2023, the 30-year fixed-rate mortgage nearly hit 8 percent, slamming the brakes on the housing market. Now, the 30-year fixed-rate hovers around 6.5 percent and will likely trend down in the coming months as inflation continues to slow. Lower rates are good news for potential buyers and sellers alike.
Mortgage applications increased 16.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending August 9, 2024. “Rates on both 30- and 15-year fixed rate mortgages decreased for the second consecutive week, and combined with the previous week’s rate moves, spurred another strong week for application activity as borrowers with higher rates took the opportunity to refinance,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Overall applications increased almost 17 percent to the highest level since January 2023, driven by a 35 percent increase in refinance applications.”
Price hikes slowed more than expected in July, and, for the first time in more than three years, the Consumer Price Index has landed below 3%. Consumer prices rose 2.9% for the 12 months ended in July, slowing from June’s 3% annual gain, according to the Bureau of Labor Statistics’ latest CPI report released Wednesday. America’s economy is showing signs of stress, and now that inflation appears under control, the Fed can reduce borrowing costs to try to get job growth booming again. “Breaking the 3% barrier is a key psychological positive,” said Sung Won Sohn, professor of finance and economics at Loyola Marymount University and chief economist of SS Economics.
Consumer spending held up even better than expected in July as inflation pressures showed more signs of easing, the Commerce Department reported Thursday. Advanced retail sales accelerated 1% on the month, according to numbers that are adjusted for seasonality but not inflation. Economists surveyed by Dow Jones had been looking for a 0.3% increase. Excluding auto-related items, sales increased 0.4%, also better than the 0.1% forecast. “Once again, this was further evidence that the U.S. consumer still has the ability to surprise to the upside,” wrote Richard de Chazal, macro analyst at William Blair.
