Inflation Heats Up, Housing Inventory Grows

[Derek Brickley]

Hey BP community, here's this week's data breakdown for those watching the mortgage and housing markets.

Inflation (CPI and PPI)

- CPI: +0.6% in April, +3.8% year over year

- Core CPI: +0.4% monthly, +2.8% annually (above expectations)

- PPI: +1.4% in April (nearly 3x expectations), +6% annually

- Core PPI: +1% monthly, +5.2% annually

The big driver was energy prices tied to the Iran conflict, along with rising food costs. Those two categories made up more than half of the monthly CPI increase.

What This Means for Mortgage Rates

The Fed is holding steady while it weighs persistent inflation against a softening labor market. No cuts expected in the near term.

New Fed Chair Kevin Warsh takes over with his first meeting June 16-17. Markets will be watching for any early signals on rate direction.

For investors, the technical picture for mortgage bonds isn't great right now. Bonds sold off sharply last week, and the 10-year Treasury yield broke above 4.58% resistance, with the next level around 4.65%. Rate improvement in the short term looks limited.

Housing Data

- Existing home sales: +0.2% in April (after declining in March)

- Inventory: 1.47 million homes, +5.8% from March, +1.4% year over year

Inventory is growing, which is a good sign, but we're still well below historical norms. Bidding wars are easing. If you're looking to add to your portfolio, competition isn't as fierce as it was a few years ago.

What's Coming This Week

- Builder confidence (Monday)

- Pending Home Sales (Tuesday)

- Fed meeting minutes (Wednesday)

- New home construction + Jobless Claims (Thursday)

Happy to answer any questions on what we're seeing now!