Inflation, the Fed, rising borrowing costs, and lower inventories are just a few areas to watch in the coming months.
Recent data from consumer inflation or the Consumer Price Index saw costs were on the rise again after the previous decline and are being watched by the markets as well as the mortgage industry. Inflation at the wholesale level or the Producer Price Index has also increased.
Could the recent uptick in inflation and a robust labor market push the Federal Reserve to be more aggressive in raising the short-term Fed Funds Rate? Time will tell as the market still sees increases in the rate for the foreseeable future.
After a big drop in home borrowing costs from June of 2022 to the first week in February, rates have been inching higher and has put a crimp into mortgage application volumes. Mortgage applications to purchase new homes fell in January but surged year over year. With the spring buying season just around the corner, buyers should start to appear as business picks up in the coming months.
The market still must deal with low inventories of existing homes on the market for sale. The National Association of REALTORS© reports that there is just 2.9 months’ worth of supply, well below 6 months that is seen as normal. Housingwire reports that for the week of February 13, the weekly housing inventory fell again by 6,858. In its latest report, the National Association of Home Builders showed optimism in February saying that the housing market is showing signs of stabilizing off a cyclical low.
Bottom line: The spring housing market should give a boost to the markets especially now that the pandemic is well behind us and visitations should be on the rise. Always remember, jobs buy homes and in this tight labor market, buyers should be more open toward homeownership.
Source: Mortgage Market Guide
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