Encouraging news for Americans as December 13th’s Consumer Price Index (CPI) figures came in lower than expected for November, resulting in an inflation rate of 7.1%. Economists anticipated a 7.3% annual increase. 

Inflation Eases

U.S. inflation has eased from its peak of 9.1% in June of this year but is still at its highest since the 1980s.

Inflation is the rate of increase in prices or cost of living over a specified period.

The average U.S. household spent $396 more in November of this year to buy the same services and goods as it did in November 2021 - however, it is down from October’s $433, according to Moody’s Analytics

Inflation Categories

Even with overall inflation cooling, some categories experienced an increase in inflation. 

According to the Bureau of Labor Statistics, annual price increases were seen in public transportation, fuel oil, housing, and airfare, up 36% over the year. 

Prices declined for used cars and energy. Despite airfare seeing an increase over the year, there was a decrease in airline fares from October to November.

CPI and Mortgage Rates

Tuesday’s news saw mortgage rates running in a variety of directions. However, according to Bankrate, the average 30-year fixed mortgage rate dipped to 6.63%, a decline of 3 basis points. 

The average 20-year fixed-rate mortgage is 6.53%, the 15-year mortgage rate is 6%, the 10-year fixed mortgage rate is 6.11%, and the 5/1 ARM rate sits at 5.49%.

The Federal Reserve and Mortgage Rates

Even with declining inflation, experts expect the Federal Reserve, the nation’s central bank, to raise interest rates today by half a point. This increase would be less than the three-quarter point increase seen at the past four Fed meetings, a sign it is retreating from the aggressive stance on its fight against inflation. 

Although the Fed does not determine interest rates, it is the orchestrator of the U.S. economy. 

The federal funds rate, the rate at which commercial banks borrow from the Federal Reserve, is determined by the Fed. Commercial banks must charge homebuyers an inflated rate when the central bank charges higher interest rates. 

The Bottom Line

Mortgage rates have been on a chaotic ride this year. Despite the Feds likely raising rates during its last meeting of the year, most experts believe we have seen the worst, and better days are ahead for the housing market. 

If you have questions about the market or are considering buying or selling, please get in touch with us and see how we can help.

The Glass House Real Estate Team

The Glass House Real Estate Team

We are passionate about empowering home buyers and sellers. Our team brings a wealth of knowledge and experience. We will help you seamlessly navigate the home buying or selling process stress-free.