Mortgage Rates Drop
The latest inflation report confirmed the anticipated decline in the annual rate, removing a major potential threat to the recent rally in mortgage markets. In addition, the other economic data hinted at slower growth, reducing future inflationary pressures. As a result, mortgage rates ended last week at the lowest levels since early December.
Inflation Eases Further
Fed officials keep a close eye on inflation, and the PCE price index is their favored indicator. In January, Core PCE was 2.6% higher than a year ago, matching expectations, but down from an annual rate of increase of 2.9% last month. This is good news for mortgage markets, since further progress toward the 2.0% target of the Fed has been challenging, and this desired level has not been achieved since February 2021.
Consumer Confidence Falls
The monthly report on consumer confidence published by the Conference Board revealed a deteriorating outlook in nearly every area, particularly from lower-income consumers earning less than $50,000. The index posted its largest monthly decline in over three years, dropping to just 98.3, far below the consensus forecast and the lowest level since June 2024. For comparison, it was at 132.6 in February 2020 just before the pandemic. Consumers expressed greater concern about price increases, as staples such as eggs have skyrocketed, and are worried that looming tariffs might affect a wide range of items. In addition, pessimism about future employment prospects climbed to a ten-month high.
Jobless Claims Rise
The Department of Labor releases the total number of new claims for unemployment insurance each week. The latest reading was 242,000, up substantially from 219,000 last week and well above the consensus forecast. Claims have not been at a higher level since the first week in October. Bigger picture, though, this was still far below the inflated figures seen during the early months of the pandemic, and in line with the levels which were typical during 2019. Weekly jobless claims are important because they are one of the timeliest indicators of labor market trends.
New Home Sales Drop
In January, sales of new homes fell 11% from December, well below the consensus forecast. However, the largest declines were seen in the South region where there was record snowfall and unusually harsh weather in many areas. The median new-home price of $446,300 was up 4% from last year at this time and a record high for January. The supply of new homes rose to the highest level since 2007.
Mortgage Rates for the week of 3-3-2025