Could the Government’s Measure of Housing Inflation Be Better?

Credit May Be Harder to Come By Over the Next Six Months, Index Shows

15 hr 11 min ago

The credit outlook may be improving, but it will remain more difficult to get loans for a while longer.

That’s according to the American Bankers Association’s Credit Condition Index which measures economists’ expectations of the future of credit offerings. The latest edition of the index, released Wednesday, showed an increase of nearly 15 points in the first quarter of the year.

The reading came in at 19.2, its highest level in six quarters. However, it was still far below the 50-point mark that the association says indicates easier credit conditions.

“The sub-50 reading still indicates that lenders are likely to continue to exercise caution when extending credit to both businesses and consumers over the coming two quarters,” the association said in the report.

FOMC Minutes Reiterate the Need For More Confidence

17 hr 9 min ago

The Federal Reserve released minutes from their January Open Markets Committee meeting Wednesday, but the notes did not shed additional light on when rates will be cut or what the catalysts to a cut might be.

The minutes echoed the talking points officials have been reiterating over the weeks since the meeting—they need more confidence that inflation will sustainably move toward its 2% goal.

While inflation is expected to tick down this year, the Fed’s outlook doubted that it would fall as fast as some anticipated.

“Al­though inflation had come in close to expectations throughout most of 2023, the staff placed some weight on the possibility that further progress in reducing inflation could take longer than expected,” the minutes said.

That need for confidence may have been prudent given the inflation data that was released after this meeting. Inflation as measured by the Consumer Price Index and the Producer Price Index came in higher than economists expected and remained particularly stubborn in areas like shelter.

Read more about the January minutes here.

Could the Government Measure Housing Inflation More Efficiently?

18 hr 51 min ago

For most items measured in the Consumer Price Index, the government uses a fairly straightforward method of checking actual prices at stores.

But housing prices, which are driving much of the country’s current inflation, are measured differently.

In addition to measuring actual rent prices, the Bureau of Labor Statistics asks homeowners how much they would rent their house out for if they leased it out instead of living there. This measure is called Owners’ Equivalent Rent (OER).

Freddie Mac chief economist Sam Khater said the government already has access to millions of data points on how much people pay for their mortgages through government-sponsored enterprises.

“The OER is attempting to get to what a typical consumer is paying for their shelter, their monthly obligation,” Khater said. “It’s a simple way, and at least one that the government should be tracking.”

Read more about how OER is lagging here.

Labor Actions Stopped Work the Most In More Than Two Decades

19 hr 55 min ago

There were more major work stoppages in last. year than there were since 2000, according to new data from the Bureau of Labor Statistics.

Thirty-three work stoppages began in 2023, double the average of the last 20 years, the bureau reported Wednesday. Nearly 459,000 workers were involved in the work stoppages, nearly half of which were in the education and health fields.

Work stoppages made headlines last year as the United Auto Workers union and entertainment-related unions organized weeks-long strikes to negotiate new contracts.

Some labor market analysts think the organized labor momentum could roll into this year, with contract expirations at AT&T (T) and Boeing (BA) ahead this year.

Survey: More Potential Homebuyers Would Jump Back In If Rates Were Below 5%

21 hr 22 min ago

As noted by the Mortgage Banker Association’s chief economist (see below), potential homebuyers are sensitive to fluctuations in mortgage rates—and a large portion are simply waiting for lower rates.

According to a survey released Wednesday by Realtor.com, nearly two-thirds of potential homebuyers would need rates to fall for it to be feasible for them to buy.

According to Freddie Mac, the average mortgage rate sits at 6.77% but not all buyers get a rate under 7%. Depending on a variety of factors including credit score, location and loan amount, mortgage rates often fluctuate above the average amount.

Mortgage Applications Drop as Rates Move Higher

22 hr 11 min ago

With hopes of imminent interest rate cuts dimming, applications for mortgage loans fell for the second straight week.

Mortgage applications fell 10.6% in the week ending Feb. 16, the Mortgage Bankers Association reported Wednesday.

The data showed applications declined across the board, with the unadjusted index for new purchases falling 6% when compared with the previous week and was 13% lower from the same week a year ago. Additionally, the refinance index was down 11% from last week, and at about the same level it was a year ago.

After a hotter-than-expected inflation report undercut optimism around Federal Reserve interest rate cuts, mortgage rates moved back up last week, further dampening enthusiasm for mortgages. 

“Potential homebuyers are quite sensitive to these rate changes, as affordability is strained with both higher rates and higher home values in this supply-constrained market,” said Mike Fratantoni, MBA chief economist.

-Terry Lane