26 Jan 2022
By Kevin Gahagan

Why Purchasing A House In 2022 Is Smart Despite Inflation

Mortgage

Why Purchasing A House In 2022 Is Smart Despite InflationAnyone who has paid attention to the news has likely noticed that inflation is a constant headline. Inflation takes place when the average cost of goods and services begins to rise. There are a number of reasons why inflation has been rising at record rates during 2021 and 2022.

The federal government has pumped money into the economy, and supply chain constraints have led to a shortage of goods. This means that everything from cars to groceries has gotten more expensive. Many individuals and families are looking for ways to save money, and this might mean putting off homeownership dreams. Even though housing prices have gotten more expensive as well, inflation should not stop someone from trying to buy a house in 2022.

Owning A Home Offers Financial Security

One of the biggest reasons why people should consider buying a house in 2022 is that owning a home offers financial security. Those who lock in a fixed-rate mortgage could pay the same mortgage premium for decades. Even though it is possible that real estate taxes and home insurance rates could rise, the mortgage payment will stay the same. Individuals who stay in their houses for 30 years might see their income go up as they get promoted at work. This means that they will have more money to put elsewhere with a consistent mortgage payment.

Those who put off owning a home could see their rents go up every year. Many apartment complexes and landlords raise the rent consistently to keep up with rising inflation. Becoming a homeowner simply offers more financial security. 

Owning A Home Acts As A Hedge Against Inflation

When inflation goes up, the average value of a single dollar goes down. It is critical for everyone to think about how they can hedge this risk, which means putting their money where it is unlikely to lose value. Putting that money in a home is a great decision. Because housing prices could increase, the value of the money in that house will go up as well. Furthermore, with interest rates on mortgages extremely low, buying a house becomes an even better inflation hedge. The best way to combat inflation is to have a fixed expense, such as a mortgage payment.

 

18 Jan 2022
By Kevin Gahagan

What’s Ahead For Mortgage Rates This Week – January 18, 2022

Financial Reports

What's Ahead For Mortgage Rates This Week - January 18, 2022

Last week’s scheduled economic reporting focused on inflation with monthly and year-over-year readings on overall and core inflation. Federal Reserve Chair Jerome Powell was confirmed for a second term as Federal Reserve chair.  The University of Michigan released its monthly survey on consumer sentiment and weekly readings on mortgage rates and jobless claims were also released.

Inflation Rises in December; Nears Fastest Growth Pace in 40 Years

Year-over-year inflation rose to a pace of seven percent in December and approached its fastest growth rate in 40 years according to the Bureau of Labor Statistics. Analysts expected year-over-year inflationary growth of seven percent as compared to November’s pace of 6.80 percent. Month-to-month inflation slowed to

0.50 percent as compared to November’s month-to-month growth rate of 0.80 percent.

Housing costs, food, and automotive sectors drove inflation in December. Shortages of computer chips used in vehicles slowed production and increased demand for vehicles. New car prices rose by one percent and used-car prices rose by 3.50 percent month-to-month.

Core inflation, which excludes volatile food and fuel sectors, rose by 5.50 percent year-over-year in December and surpassed the expected reading of 5.40 percent that was based on November’s core inflation rate of 4.90 percent. Rents rose by 0.40 percent for the third consecutive month. Food prices rose by 0.50 percent month-to-month and costs for clothing and furniture also rose.

Federal Reserve Chair Jerome Powell was confirmed for a second term and addressed the Fed’s plans for slowing inflation. Mr. Powell said, “The economy no longer needs or wants the very highly accommodative policies we’ve had in place to deal with the pandemic and its aftermath.”

Energy prices fell by 0.40 percent in December and decreased for the first time since April.

Mortgage Rates Rise. Jobless Claims Mixed

Freddie  Mac reported higher mortgage rates as the average rate for 30-year fixed-rate mortgages rose by 23 basis points to 3.4

Initial jobless claims rose last week with 230,000 first-time claims filed as compared to the prior week’s reading of 207,000 initial claims filed. Analysts expected first-time claims to decrease to 200,000 initial claims filed. Ongoing jobless claims fell to 1.60 million continuing claims filed as compared to the previous week’s reading of 1.75 million ongoing jobless claims filed.5 percent; rates for 15-year fixed-rate mortgages rose 19 basis points and averaged 2.62 percent. The average rate for 5/1 adjustable rate mortgages rose 16 basis points to 2.57 percent. Discount points averaged 0.70 percent for fixed-rate mortgages and 0.30 percent for 5/1 adjustable rate mortgages.

The University of Michigan’s consumer sentiment index for January reported lower consumer enthusiasm for current economic conditions with an index reading of 68.8 as compared to the expected reading of 70.0 and December’s index reading of 70.6.

What’s Ahead

This week’s scheduled economic reporting includes readings on housing markets and sales of previously-owned homes. Readings on building permits issued and housing starts will be released along with weekly readings on mortgage rates and jobless claims.

05 Nov 2021
By Kevin Gahagan

FOMC Statement: Fed Policymakers Discuss Easing Accommodations as Economy Improves

Financial Reports

FOMC Statement: Fed Policymakers Discuss Easing Accommodations as Economy ImprovesThe Federal Reserve’s Federal Open Market Committee considered easing monetary accommodations implemented in response to stronger economic conditions according to its post-meeting statement issued November 3. The Fed started making trillions in monthly bond purchases when the pandemic started but slowed its purchasing pace to $120 billion per month in June 2020. The Fed will soon reduce its monthly bond purchases to $105 billion monthly.

The Fed said it will continue to purchase bonds until the economy makes “substantial progress” toward its legally mandated goals of achieving two percent inflation and maximum employment. Supply shortages and high demand for goods caused by the pandemic have impacted the overall economy, but labor markets have suffered disproportionately. Pandemic-driven quits and retirements have left many job openings that remain unfilled.  Service-related jobs in hospitality and travel have been especially hard-hit as consumers continued to stay home.

Fed Calls High Inflation “Transitory”

Federal Reserve policymakers continued to call current higher-than-expected inflation “transitory,” but did not explain how long high inflation is expected to last. Supply-chain logjams continued to negatively impact supply and demand for goods and services; in some cases, high demand and short supplies drove inflation higher: “Inflation is elevated, largely reflecting factors that are expected to be transitory. Supply and demand imbalances related to the pandemic and the reopening of the economy have contributed to sizable price increases in some sectors.”

FOMC members did not raise the current benchmark interest rate range of 0.00 to 0.25 percent, but financial markets expect two or more rate hikes in 2022.

Fed Chair Expects Inflation to Remain High into Mid-2022

Fed Chair Jerome Powell commented on high inflation during a press conference given after the FOMC post-meeting statement: “Our baseline expectation is that supply chain bottlenecks and shortages will persist well into next year and elevated inflation as well.” Chair Powell continued: “As the pandemic eases, supply chain issues will abate and growth will move up. As that happens, inflation will decline from today’s elevated levels.”

Mr. Powell further commented that he expected labor markets to strengthen as the delta variant of the covid virus continues to decline. 

16 Aug 2021
By Kevin Gahagan

What’s Ahead For Mortgage Rates This Week – August 16, 2021

Financial Reports

What's Ahead For Mortgage Rates This Week - August 16, 2021Last week’s economic reporting included readings on job openings, inflation, and consumer sentiment. Weekly readings on mortgage rates and jobless claims were also released.

Job Openings Rise as Inflation Rate Falls

The Labor Department reported a record number of job openings for the fourth consecutive month in June. Job openings rose to 10.1 million available jobs from May’s reading of 9.5 million job openings. Analysts expected job openings to decrease to 9.1 million jobs in June. 

Analysts said that previous headwinds to hiring including generous unemployment benefits and childcare issues may be easing. Workers took advantage of the rising demand for employees to negotiate higher wages and switch jobs for better offers. 

The Consumer Price Index fell by 0.40 percent in July to 0.50 percent as compared to June’s reading of 0.90 percent. The pace of year-over-year inflation remained at 5.40 percent  Core inflation, which excludes volatile food and fuel sectors, fell to 0.30 percent from 0.90 percent. July’s reading showed the impact of food and gas prices on inflation in recent months.

Mortgage Rates Rise, Jobless Claims and Consumer Sentiment Index Fall

Average mortgage rates rose last week as the rate for 30-year fixed-rate mortgages rose by 10 basis points to 2.87 percent. Rates for 15-year fixed-rate mortgages averaged 2.15 percent and were five basis points higher; rates for 5/1 adjustable rate mortgages averaged four basis points higher at 2.44 percent. Discount points averaged 0.70 percent for fixed-rate mortgages and 0.30 percent for 5/1 adjustable rate mortgages. 

Initial jobless claims fell to 375,000 new claims filed as compared to the prior week’s reading of 387,000 first-time claims filed. Continuing jobless claims also fell; 2.87 million ongoing claims were filed last week as compared to the prior week’s reading of 2.98 million continuing jobless claims filed.

The University of Michigan reported its lowest reading for consumer sentiment since 2011. The preliminary reading for August fell to an index reading of 70.2 in August as compared to July’s reading of 81.2. Analysts expected an index reading of 81.3 for August, but rising covid 19 cases attributed to the highly contagious Delta form of the virus tanked consumer sentiment as mask requirements and social distancing guidelines re-emerged in some areas.

What’s Ahead

This week’s scheduled economic releases include readings from the National Association of Home Builders on housing markets, government readings on housing starts, and building permits issued. Retail sales will also be reported.

19 Jul 2021
By Kevin Gahagan

What’s Ahead For Mortgage Rates This Week – July 19, 2021

Financial Reports

What's Ahead For Mortgage Rates This Week - July 19, 2021Last week’s scheduled economic reports included readings on inflation, Fed Chair Jerome Powell’s testimony before the House Financial Services Committee, and the University of Michigan’s Consumer Sentiment Index. Weekly readings on mortgage rates and jobless claims were also released.

Consumer Price Index: June Inflation Grows at Fastest Pace Since 2008

June’s Consumer Price Index showed the fastest pace of inflationary growth in 13 years; inflation grew by 5.40 percent on a seasonally-adjusted annual basis. Used car sales accounted for one-third of the growth, but prices also rose for clothes, food, energy, and travel/hospitality. The year-over-year inflation rate for May was 5.00 percent.

Inflation grew by 0.90 percent month-to-month, which exceeded analyst’s expectations of 0.50 percent growth and 0.60 percent growth in May. The Core Consumer Price Index, which excludes volatile food and energy sectors also grew by 0.90 percent in June as compared to a month-to-month reading of 0.70 percent in May. Analysts expressed concern that the rapid pace of inflation may not slow as quickly as the Federal Reserve predicted.

Fed Chair Jerome Powell Testifies Before House Financial Services Panel

Fed Chair Jerome Powell maintained the Federal Reserve’s earlier prediction that the pace of inflation would ease, but not immediately: “Inflation has increased notably and will likely remain elevated in coming months before moderating.”Mr.Powell said that inflationary growth has come in at a faster pace than the Fed was hoping to see.

Chair Powell identified three factors contributing to current inflationary growth. Weak inflationary growth during the pandemic will drop out of the year-over-year calculation; Production and supply chain constraints have led to sharp price increases after the pandemic. The third factor is a surge in demand for services as the economy reopens.

The Fed Chair said that “it’s a pretty narrow group of things that are producing these high readings.”

Mortgage Rates, Jobless Claims Fall

Freddie Mac reported mixed mortgage rates last week as the rate for 30-year fixed-rate mortgages averaged 2.88 percent and were two basis points lower. Rates for 15-year fixed-rate mortgages rose by two basis points to an average of 2.22 percent. Rates for 5/1 adjustable rate mortgages fell by five basis points to 2.47 percent on average; Discount points averaged 0.70 percent for 30-year fixed-rate mortgages and 0.60 percent for 15-yar fixed-rate mortgages. Discount points for 5/1 adjustable rate mortgages averaged 0.30 percent.

New jobless claims fell to 360,000 initial claims filed from the previous week’s reading of 386,000 claims filed. Data for continuing jobless claims were not updated last week.

The University of Michigan reported no change in its Consumer Sentiment Index for July with an index reading of 85.5. Analysts expected a reading of 86.3.

What’s Ahead

This week’s scheduled economic reporting includes readings from the National Association of Home Builders Housing Market Index, reports on housing starts and building permits, and data on existing home sales. Weekly readings on mortgage rates and jobless claims will also be released.