I want to start by sharing this article is based on a market update sent to me from one of my preferred local lenders here in Ocean City, Tyler Bryce with Guaranteed Rate. You can view the whole article HERE. But let me try to break it down in layman’s terms. 

When it comes to mortgage rates, there are many things that contribute to interest rates in the money business. The Fed has to consider many variables but the easiest to make sense with are the jobs report and CPI(Consumer Price Index). The job report comes out every 4 weeks or so and the CPI report comes out every 4 weeks as well. And the two reports are staggered so every two weeks these reports can factor into the Feds next moves. 

The first interest rate indicator is the jobs report. This report is a combination of unemployment rate, new jobs created, available jobs for the workforce, etc. The Fed uses this data to adjust the rates up or down to help the economy. Say, there is a higher unemployment rate and number of jobs decreases, the Fed will lower rates to stimulate home sales because the job market is less than ideal. So its an inverse reaction. If one gets “better” the other gets “worse”. ie employment rate goes up, interest rate goes down. This is what happened two weeks ago! The unemployment rate was higher than expected so the rates were lowered to combat less than ideal employment market.

This week’s news discusses the CPI report. The consumer price index is how inflation is measured. The higher the CPI, the higher inflation rate. FINALLY this week’s CPI was lower than was expected. A healthy CPI is expected to rise about 2% every year. This year we are at 4%(not great). But from post-Covid’s 9% CPI there has been a steep decline to about 4%. The Fed’s target is 2% so we still have work to do but we’re going in the right direction. 

So this month, we had two favorable reports. First the job report came back with higher unemployment rate bringing a slightly lower rate. Then we get a great CPI report lowering interest rates even more. Last month interest rates were close to 8% but now we are down to around 7.35%. I know 2/3 of a percent isn’t going to change anyone’s lives today but it is going the right direction. 

The biggest relief for me is the CPI report. It doesn’t feel like inflation is going down looking at the price of everything. I mean, I don’t feel a difference, but maybe it’s a start!