Monday Market Brief Aug. 14, 2023

Inflation heads lower

“Core” inflation (which excludes food & fuel prices), dropped to +4.7% year-over-year in July, from +4.9% in June. Back in September 2022, that figure was 6.6%. So we’re definitely moving in the right direction, but the Fed would like to see core inflation closer to its 2% target before it would consider cutting rates.

That inventory issue

The mild rebound in inventory (# of existing homes for sale) that started in early 2022 has come to a stop, with July’s active inventory falling 6% YoY to just 647,000 units nationwide. In July 2019 (pre-pandemic), that same figure was 1.24 million! So the number of homes for sales has halved over the last 4 years. Is it any wonder that home prices are rising again?

The first time that average 30-yr mortgage rates exceeded 7% (in recent years) was October 2022 – and headline inflation at that time was 7.8%. Today, average 30-yr mortgage rates are back above 7%, and the latest headline inflation figure was 3.2%! Rates will follow inflation down eventually, but it can’t happen fast enough for would-be buyers AND sellers.