Author: Eric BernsteinPublished:
Just when the labor market looked to finally be cooling, inflation data came in HOT. Hotter than expected across the board. And with the stock market looking seemingly unstoppable and Bitcoin breaking all time highs, the Fed Meeting this week is going to be VERY interesting. Sign up for our weekly Friday rate texts. It could make a HUGE difference in your homebuying decision.
The average rate for a 30-year fixed rate conventional loan shot up to 6.87% from 6.713%.
Inflation is causing trouble for homebuyers...
CPI came in higher than expected month-over-month (.4% actual vs .3% expected). Year over year, CPI increased 3.2%, after reporting 3.1% in January, and while .1% seems like nothing, it's not what anyone wants to see. Keep in mind that the Fed is looking for more data that supports a trend towards its 2% annual inflation target for inflation before cutting rates. While no one is saying that there won't be bumps in that road towards 2%, ANY bump will cause pause to make sure it is in fact just a bump and not a new trend upwards. That means any hopes of a rate cut is dashed until we do see more data supporting a trend back towards the Fed's target.
The good news - 60% of CPI's increase was due to just 2 factors: gas prices and shelter costs, which means when drilling down into the data, the numbers may not be as bad as they seem.
The more depressing news - PPI and Core PPI came in TWICE as high as expected! PPI captures average price shifts before they reach consumers and serves as a potential signal for the prices consumers ultimately end up paying. The fear is that this inflation will be passed on to the consumer and wind up increasing CPI in future months. The PPI report last week caused mortgage rates to increase dramatically.
But it's not all bad! Year-over-year Core CPI reported at 3.8% - the smallest year-on-year increase since May 2021. A separate report from the Atlanta Fed showed its "sticky-price" CPI increased 4.0% on an annualized basis in February after rising 6.7% in January. Based on the CPI data, economists estimated that the core PCE price index (which is reported at the end of the month) rose 0.2% in February after increasing 0.4% in January. That would lower the increase in core inflation to 2.7% from 2.8% in January.
So, I'm hopeful that this is more of a bump than a new trend, but as it stands right now, I wouldn't expect any rate cuts until at least June (barring some unknown event) since we'll need a couple months of good data to prove it was just a bump.
Retail sales are still slumping...
Retail sales for February showed that consumers are still somewhat hesitant to shop. The numbers reported were worse than expected though Not as the drop we saw in January. Consumers shying away from retail is good news for inflations concerns since retailers will typically resort to slashing prices to get more shoppers - and everyone loves seeing lower prices!
In other news...
Bitcoin's Market Cap briefly surpassed Silver's to become the 8th largest asset in the world.
Lennar - one of the largest homebuilders in the country - reported earnings last week. During the earnings call, the CEO noted that affordability is "stretched," noting that "we are definitely seeing a little bit more credit card debt and personal debt from the customer showing up in their applications." These public statements on the state of the consumer are telling. Just how much longer can we sustain an economy at these high interest rates?
The average rate for a 30-year fixed rate conventional loan shot up to 6.87% from 6.713%.
Inflation is causing trouble for homebuyers...
CPI came in higher than expected month-over-month (.4% actual vs .3% expected). Year over year, CPI increased 3.2%, after reporting 3.1% in January, and while .1% seems like nothing, it's not what anyone wants to see. Keep in mind that the Fed is looking for more data that supports a trend towards its 2% annual inflation target for inflation before cutting rates. While no one is saying that there won't be bumps in that road towards 2%, ANY bump will cause pause to make sure it is in fact just a bump and not a new trend upwards. That means any hopes of a rate cut is dashed until we do see more data supporting a trend back towards the Fed's target.
The good news - 60% of CPI's increase was due to just 2 factors: gas prices and shelter costs, which means when drilling down into the data, the numbers may not be as bad as they seem.
The more depressing news - PPI and Core PPI came in TWICE as high as expected! PPI captures average price shifts before they reach consumers and serves as a potential signal for the prices consumers ultimately end up paying. The fear is that this inflation will be passed on to the consumer and wind up increasing CPI in future months. The PPI report last week caused mortgage rates to increase dramatically.
But it's not all bad! Year-over-year Core CPI reported at 3.8% - the smallest year-on-year increase since May 2021. A separate report from the Atlanta Fed showed its "sticky-price" CPI increased 4.0% on an annualized basis in February after rising 6.7% in January. Based on the CPI data, economists estimated that the core PCE price index (which is reported at the end of the month) rose 0.2% in February after increasing 0.4% in January. That would lower the increase in core inflation to 2.7% from 2.8% in January.
So, I'm hopeful that this is more of a bump than a new trend, but as it stands right now, I wouldn't expect any rate cuts until at least June (barring some unknown event) since we'll need a couple months of good data to prove it was just a bump.
Retail sales are still slumping...
Retail sales for February showed that consumers are still somewhat hesitant to shop. The numbers reported were worse than expected though Not as the drop we saw in January. Consumers shying away from retail is good news for inflations concerns since retailers will typically resort to slashing prices to get more shoppers - and everyone loves seeing lower prices!
In other news...
Bitcoin's Market Cap briefly surpassed Silver's to become the 8th largest asset in the world.
Lennar - one of the largest homebuilders in the country - reported earnings last week. During the earnings call, the CEO noted that affordability is "stretched," noting that "we are definitely seeing a little bit more credit card debt and personal debt from the customer showing up in their applications." These public statements on the state of the consumer are telling. Just how much longer can we sustain an economy at these high interest rates?
Key reporting dates this week:
Mon, 3/18: Home builder confidence index
Tues, 3/19: Housing starts, Building permits
Wed, 3/20: FOMC interest-rate decision
Thurs, 3/21: Initial jobless claims, Existing home sales
Fri, 3/22: Atlanta Fed President Raphael Bostic speaks
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About the Author:
Eric Bernstein is the President and Co-Founder of LendFriend Mortgage, where he helps homebuyers make smarter, more confident decisions in today’s fast-moving housing market. With over a decade of experience guiding hundreds of clients—from first-time buyers to seasoned investors—Eric brings a mix of market insight, strategy, and personalized service to every mortgage transaction. Each week, Eric breaks down the housing and economic headlines that matter, giving readers a clear, no-fluff view of what’s happening and how it might impact their buying power.