Mortgage rates moved higher again last week, with market 30 year fixed rates increasing another 0.125% week over week. Inflation data came in hotter than expected, which added more pressure to both bond markets and interest rates.
Here’s a look at what happened last week and what we’ll be watching in the days ahead.
Inflation Came in Higher Than Expected
One of the biggest stories last week was inflation.
Consumer inflation, measured by the Consumer Price Index (CPI), rose 0.6% in April and 3.8% year over year. Higher gas, fuel, and food prices were some of the biggest contributors.
Core inflation, which excludes food and energy, also came in above expectations:
• Up 0.4% for the month
• Up 2.8% year over year
Wholesale inflation also showed continued pressure. Producer Price Index (PPI) data rose 1.4% monthly and 6% annually, reflecting ongoing increases in energy and production costs.
Inflation remaining elevated continues to make the Federal Reserve’s job more difficult as markets look for clues about future interest rate policy.
The Fed Continues Balancing Inflation & Economic Slowdown Concerns
The Federal Reserve is currently navigating competing concerns.
On one side, inflation remains stubbornly high. On the other, there are signs the labor market may be gradually slowing down.
Kevin Warsh was officially confirmed as the new Fed Chair, and markets are now closely watching the upcoming June Fed meeting for additional guidance. Warsh has historically taken a firm stance on inflation, which could influence future policy decisions moving forward.
Housing Inventory Is Improving
There was some encouraging news in housing last week.
Existing home sales rose slightly by 0.2% in April, while housing inventory increased to 1.47 million homes nationwide.
Although inventory remains below historical averages, more homes hitting the market is helping ease some of the intense competition buyers have experienced over the last few years.
Bidding wars have cooled in many markets, and affordability has improved modestly compared to previous months.
Consumers Are Still Spending
Retail sales increased 0.5% in April, showing consumers are continuing to spend despite higher fuel and living costs.
At the same time, labor market data showed a mixed picture:
• Initial jobless claims remained relatively low
• Continuing unemployment claims stayed elevated
This suggests employers are still holding onto workers overall, but people searching for jobs may be taking longer to find new employment opportunities.
Mortgage Rates Continue Facing Pressure
Mortgage bonds weakened last week, while the 10 year Treasury yield moved above key resistance levels.
In general, higher Treasury yields tend to lead to higher mortgage rates, which is part of why rates moved upward again over the past week.
Markets continue reacting to inflation data, Fed expectations, and broader economic uncertainty.
What We’re Watching This Week
Several reports this week could influence mortgage rates and market sentiment, including:
• Builder confidence
• Pending home sales
• New home construction data
• Federal Reserve meeting minutes
• Updated jobless claims
As always, markets will continue watching inflation trends, labor market data, and signals from the Federal Reserve closely.
If you have any questions about today’s market or how rates may impact your plans, feel free to reach out anytime.
