Market Watch – Inflation and The Housing Marketing

This week we saw the release of Consumer Price Index (CPI) for June 2023, which recorded a rise of 0.2 percent, a slight increase from May’s 0.1 percent, according to the U.S. Bureau of Labor Statistics. Year-over-year, the all-items index experienced a 3.0 percent hike, a decrease from May’s 4.0 percent, indicating a sustained deceleration in inflation for the past 12 months. With the inflation rate now standing just one percentage point above the Federal Open Market Committee’s 2 percent goal, the inflation scenario, particularly its impact on the housing market, demands a closer look.
The slowing of inflation, however, does not translate equally into the housing sector. The Bureau’s data highlight the ‘shelter’ category, encompassing housing costs, as the most significant contributor to the CPI’s all-items increase. However, he also hints at potential stabilization in rents and home prices, a necessary step in addressing the critical issue of housing affordability in the nation.
Encouraging data from CoreLogic suggest a slowdown in the home price growth rate, while Fannie Mae’s Home Purchase Sentiment Index shows a meager increase, pointing to a potentially less heated market. However, with current high mortgage rates, potential home buyers might still hesitate. Lawrence Yun, Chief Economist at the National Association of Realtors, offers some optimism, “Low inflation means low mortgage rates. Therefore, decelerating consumer prices could steadily lift home sales and increase home production in a few months.”
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