7.13.2024 Weekend market update
**Warning ~ I am going to geek out on economic reports for just a moment
TLDR: Rates got better, but only slightly compared to what you are seeing on social media. But a win is a win, and we will take it!
When I scroll through social media, I am flooded with loan officers posting that “RATES HAVE DROPPED.” Yes, they did go down, but not by as much as I would have hoped, and I know the reason behind it….
A few days ago, all eyes were on the Consumer Price Index (CPI), which brought some good news that inflation was decreasing. That is what we needed to see for mortgage rates to drop, which they did at the second-fastest pace this year. But remember, these rates change daily so when the spotlight shifted to another economic report the next day, the Producer Price Index (PPI), and the story took a different turn.
Now, the PPI doesn't usually pack the same punch as the CPI when it comes to influencing mortgage rates. However, recent PPI reports have sometimes significantly impacted, for better or worse. Yesterday’s PPI release seemed like it might be one of those impactful instances—and not in a good way.
The headline and a revision to last month's PPI numbers showed that the annual PPI was half a percent higher than expected. If this were a CPI issue, mortgage rates would likely have soared upwards. Even though it was a PPI issue, some upward pressure on rates wouldn’t have been surprising.
Yet, in an interesting twist, mortgage rates actually moved lower, even if only slightly. Such an improvement following these numbers begs for an explanation. In this case, it comes down to the specifics of the PPI data not translating to the consumer-facing inflation metrics that influence rate policy.
Higher PPI often signals upward pressure on the Personal Consumption Expenditures (PCE) inflation data—the broadest national measure of consumer inflation and the Federal Reserve’s favorite gauge. But today’s PPI report didn’t send that signal. Initially, bonds reacted with a bit of panic, but they quickly settled into modestly stronger territory and stayed calm throughout the day.
So I know it's not the most exciting explanation of mortgage rates, but it is what happened. And ss a result, the average lender managed to slightly lower rates. Even if this small victory only served to maintain a few days ’ worth of gains, it was still a win in the current market scenario. I wonder what movement next week will bring!