Inflation Data Sends Mortgage Rates Higher, Impacting Spring Market
Producer Price Index report follows CPI surge, while war concerns and limited inventory continue to shape housing demand.
En resumen
- Mortgage rates climbed Wednesday following a hot inflation report (PPI), adding to recent surges driven by war concerns.
- This impacts the spring housing market, which was showing signs of recovery despite still-limited inventory and cooling price growth.
Resumen generado por IA
Por qué importa
The Producer Price Index (PPI) measures the average change over time in the selling prices received by domestic producers for their output. It is a key indicator of inflation. Mortgage rates had previously reversed course in March due to the start of the war.
An exceptionally hot read on inflation early Wednesday, the government's Producer Price Index, or PPI, sent bond yields higher, and mortgage rates followed. Rates had already been surging higher earlier this week on news of more trouble in negotiations over the Iran war.
The average rate on the popular 30-year fixed mortgage rose Wednesday to 6.57%, according to Mortgage News Daily. It is now 15 basis points higher than it was last Friday, and it is sitting at the highest level since March, when falling rates reversed course due to the start of the war.
Wednesday's increase was much smaller than the jump following another inflation report: the Consumer Price Index released Tuesday.
"PPI, in general, is not as big a deal as CPI," explained Matthew Graham, chief operating officer at Mortgage News Daily. "Bonds are also assuming a corrective drop after the war is over."
The move comes just as the spring market, which stalled in March, was finally beginning to see new life. The National Association of Realtors said data from Sentrilock, which provides the lockboxes real estate agents use on for-sale properties, recorded home showings in April were up 8% year over year. All four regions of the country saw increases.
Some of the new demand is being driven by a cooling in home prices. They're still higher than they were a year ago nationally, but not by much. And then there is supply.
"Inventory has not rebounded yet, we're still 11-12% below where we should be," said Andy Walden, head of mortgage and housing market research at ICE, a mortgage technology company.
Walden also noted the recent increase in interest rates, roughly 40 basis points higher than February. Mortgage rates, however, were closer to 7% at this time last year.
"If you look at what that means for buying power out there in the market, it's down about 4% from where it was in February," he said. "We're more affordable than last year, but not as affordable as we were early this year."
Qué observar
Perspectiva de IA — posibilidades, no hechos
Mortgage rates may continue to fluctuate based on further inflation data and developments in the Iran war negotiations.
Probable · En días
The spring housing market may see continued, albeit cautious, recovery due to still-limited inventory, despite higher borrowing costs.
Posible · En semanas
Bond yields could see a corrective drop once the Iran war is perceived to be nearing resolution.
Posible · En meses
Preguntas abiertas
- What specific 'trouble' occurred in the Iran war negotiations?
- What is the expected timeline for the resolution of the Iran war negotiations?
- What are the specific drivers behind the 8% year-over-year increase in home showings?
- What is the projected impact of current interest rates on future home sales volume?
