Holly Walther Lending Team X

The CPI (Consumer Price Index) report for the Month of December was released yesterday and it yet again showed another meaningful decline in year over year inflation!

Headline Inflation: Actual: 6.5%, Anticipated: 6.5% Previous Month Reading: 7.1%
CORE CPI (Fed’s Favorite Read on Inflation as it strips out food and energy costs): Actual: 5.7% Forecasted: 5.7% Previous Month: 6.0%

What came as a surprise was a sharp rise in Shelter costs. Here we saw the largest month over month move since 1985!

Coming in .8% Higher in December compared to November. This was a surprise to all. However, as I have mentioned in the past, shelter has a lag effect, as we have seen home prices decline .5% and rents decline .8% month over month. As the shelter reading catches up to real time, and all other factors continue to show price moderation, inflation will drop significantly! As inflation declines, as will mortgage rates, like we have seen occur over the past few months.

Great inflation report, indeed! Now what does this all mean for our buyers and sellers?

With the last three CPI reports showing a meaningful decline in inflation, mortgage interest rates have fallen as well. As of this morning the 30 year fixed mortgage was sitting right at 6%, meaning in some cases we are seeing some options now in the 5%’s. This is giving buyers significant relief in the affordability realm, which is increasing the demand in the market. Over the last few weeks we have seen a sharp rise in the number of Multiple Offer scenarios, when the home went under contract ABOVE the list price.

A very sharp contrast from the market conditions a few months back where rates were in the 7%’s. Where all this is very exciting and welcomed with open arms, I still have concern on home prices running higher if inventory does not improve. As we know inventory is still VERY LOW, with demand picking up based on improving interest rates, we could see a scenario where price competition becomes a real factor again.

In closing, this week’s CPI report was another huge victory in the fight against inflation.

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