Highway insights
Views on all the real estate news from the past week, deep dives on trending topics, a bit of inspiration, and more.
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With the US/Iran peace process underway, oil prices have fallen back to pre-war levels, but mortgage rates remain high (due to concerns about the Fed’s hawkish tilt). But inflation may have already peaked, and mortgage rates should follow inflation lower.
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The Fed voted to keep interest rates steady, but many Fed members have a hawkish bias (wanting to raise rates). Over the last three months, energy prices have been driving inflation higher. But with the US/Iran conflict reportedly nearing an end, this should begin to reverse.
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The strongest jobs week we’ve seen in a long time was followed by surprisingly robust existing home sales and a relatively mild rise in “core” CPI. The Fed will meet next week, with no change to policy interest rates expected.
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Jobs week is off to a strong start, with a big jump in job openings (JOLTs) and the biggest growth in private employment (ADP) we’ve seen in 18 months.
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Average mortgage rates moved higher as the market absorbed the latest inflation data (a big jump in PCE) and flattish home prices (Case-Shiller). The US and Iran say that they are getting closer to a “deal” but we’ve heard this story before.
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Average 30-yr mortgage rates jumped last week, as reaccelerating inflation pushed global bond yields higher. Yet despite higher mortgage rates, April pending home sales still rose (for the 3rd-straight month).
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Oh my! That April CPI! Inflation surged on higher energy prices, which affect a lot more than just gasoline and jet fuel prices (airline tickets, fertilizer, etc.) So far, the housing market is showing resilience, but there is little doubt that higher mortgage rates are keeping spring/summer transaction volumes more muted than they would be otherwise.
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Oil prices, inflation fears, and mortgage rates are likely to remain elevated until the US/Iran conflict ends. But even today, mortgage rates are nearly a half a percentage point lower than they were at the same time last year, and many markets are significantly more buyer-friendly.
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A day after the Fed voted to keep rates steady, the March PCE (inflation) figure jumped to +3.5% YoY, driven by higher oil prices. Mortgage rates moved up as well, but they’re still half a percent lower than they were a year ago, and flattish national home price growth is helping to improve affordability in many cities.
The US/Iran war continues, but the stock and bond markets are increasingly behaving as if it’s already over, with the S&P 500 stock market index now above its pre-war levels and average 30-yr mortgage rates slowly returning to the low 6% range.
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Threats, rescue missions, an ultimatum, and a ceasefire. The situation in the Middle East remains fragile and unpredictable. But back home, we got another big beat from the BLS, and an encouragingly typical Spring rise in inventory.
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Jobs growth remained weak, but the market is still focused on the potential inflationary impact of the US/Iran conflict. While mortgage rates have eased recently, they’re still nearly half a percentage point higher than they were pre-war.
