Inflation Ticks Up and Consumer Confidence Falls: Economic Uncertainty Has Kept Mortgage Rates Steady
Inflation continues to be a thorn in the economy, and data indicates growing concern among consumers and businesses about the impact of tariffs on the broader economy.
On Friday, the PCE index, the Fed’s preferred inflation gauge, held steady at a pace above target, and the core index gained. This contrasts somewhat with recent trends in the CPI data, which have shown some progress.
Consumer confidence also declined overall, largely as a result of lower expectations for the next six months, which fell to a 12-year low.
Uncertainty about what lies ahead has kept long-term rates relatively steady over the past month, and mortgage rates have followed suit. They fell 2 basis points this week, continuing to hover in a range of 6.6% to 6.7%.
While mortgage rates aren’t low, they are lower than they were, and that has likely helped push both new home sales and pending home sales higher month-over-month.
However, looking year-over-year, we see that new home sales have increased while pending home sales have decreased, highlighting the continued benefits of the new home market, especially when builders are flexible on price and can offer lower-rate financing.
Taking a step back, the latest Case-Shiller data on home prices in January showed an increase, led by cities like New York, Chicago and Boston.
This contrasts somewhat with more recent data on asking prices, which have softened. In fact, Realtor.com®’s weekly housing data showed that listing prices were steady even as new listings and active inventory growth continued. While the market is moving more slowly than at this time last year, the gap is narrowing.
Finally, as home prices and mortgage rates remain high, the median down payment reached a new high in the fourth quarter and for the full year. The amount of wealth or equity homeowners have in their homes and different trends in home sales by price point contribute to this.
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