Sigh of Relief as Inflation Calms

Wednesday Wire – w/ Drew

04/12/2023

This week all eyes are of course on the release of multiple economic reports, primarily the Consumer Price Index (CPI). This report has carried more importance over the past year than any other time as it is one of the most direct reflections of Inflation. Other reports include the ISM Manufacturing report last week, OER (Owner’s Equivalent Rent), and the JOLT survey (Job Openings and Labor Turnover.

The release of the CPI report was right in line with expectations showing continued slow down of inflation in March amid drops in gasoline and grocery prices.  This puts US Inflation at 5% which is the lowest it has been since 2021.  Remember that even though that appears to be great news, the overall target of the FED is to have Inflation closer to 2% meaning we still have a way to go. There is still much debate as to whether or not the FED will follow through with maintaining the current interest rate or make one final hike 0.25%. In addition to this the JOLT survey showed an addition of 236,000 jobs in March which shows a slight cooling off of the market when compared to the 500k plus jobs added in January.  The job market is slowing at a measured pace.

Mortgage applications saw a significant increase last week amongst the interest rate drops climbing by 5.3% on a seasonally adjusted basis.  Interest rates settled back into the mid 6’s this week as we continue to remain on a small roller coaster. The old saying “Time is of the Essence” rings much truth when applied to interest rates today.  Meaning that the key is to lock in those interest rates on the low points of the roller coaster while attempting to avoid any of the high points.  This is done through a process known as floating the rate in which a buyer can choose to have their lender not lock in the interest rate until a low period occurs.

Current projection on interest rates shows that we should have some more occasional softening of rates prior to the next FED meeting which is scheduled for the first week of May. I would anticipate this to occur over the course of next week as Economists try to gage whether or not the FED will impose an increase or not.  Expect the lows to come in around 6.125% while the highs remain around 6.625%.  The current trend over the last few months has held the lows occurring most often towards the end of the week.

On a side note – if you heard that FHA is now offering a 40-year mortgage, unfortunately you heard wrong.  This question was asked of me several times over the past week.  FHA announced a new Loan Modification Option that has a 40-year repayment term but this is an option for select existing FHA mortgages.  Reporters misinterpreted the initial news because they did not read the released article thoroughly.

* interest rates may vary dependent on credit score and other factors

Drew Waack

Mortgage Advisor

NMLS #: 1573539