Mortgage rates dropped for the fourth week in a row, dropping another seven basis points according to the Freddie Mac Primary Mortgage Market Survey as of November 12th. This is the lowest they have been in seven weeks and a cumulative decrease in rates over the past month of almost 30 basis points. This is a welcome development that gives borrowers greater flexibility as they navigate the current housing market. However, this relief may be short-lived as persistent inflation and a strong labor market are fueling expectations for a Federal Reserve rate hike in December, and borrowing costs are likely to face renewed upward pressure heading into the holidays.
Mortgage applications increased 6.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending November 6th. “Mortgage rates declined for the fourth straight week, with the 30-year fixed rate dropping to the lowest rate since mid-September. Moreover, the FHA rate was back below seven percent and was more than 20 basis points lower than the conforming rate, which helped first-time home buyers currently in the market,” said Joel Kan, CMB, MBA’s Vice President and Deputy Chief Economist. “The declining trend in rates helped to spur stronger application activity, although the pace of purchase and refinance applications remain considerably lower than a year ago.
Costs for goods and services rose more than expected in October, providing fresh warning signs for the Federal Reserve in its fight to lower inflation. The Consumer Price Index, a broad gauge of costs across the U.S. economy, increased a seasonally adjusted 0.4% for the month, the Bureau of Labor Statistics reported Tuesday. Stripping out volatile food and energy, so-called core CPI increased 0.3% against the forecast for a 0.2% gain. “This was the report the market could least afford to see,” said Karen Manna, fixed income investment strategist at Federated Hermes. “A hotter inflation print raises fresh questions about whether the Fed has done enough to contain price pressures and reinforces the risk that interest rates need to move higher and stay there for longer.”
The number of Americans filing new claims for unemployment benefits increased more than expected last week but remained at a level consistent with a stable labor market, allowing the Federal Reserve to focus on fighting inflation. Initial claims for state unemployment benefits rose 9,000 to a seasonally adjusted 200,000 for the week ended November 7th, the Labor Department said on Thursday. Economists expect layoffs to remain low through the end of the year, though seasonal volatility related to the holiday season could cause some spikes in the claims data. Some argue that a smaller workforce, due to retirements and the Trump administration’s immigration crackdown, is the key driver of the historically low level of claims. “A generally smaller labor force could mean fewer workers to file for unemployment insurance,” said Veronica Clark, an economist at Citigroup.
