What's Next up For Mortgage Rates: Do you know what drives mortgage rates? It’s not the Fed…it’s inflation.

Introduction:

Have you ever wondered what really drives mortgage rates?

It's not the Federal Reserve, but rather the impact of inflation. Surprisingly, inflation has been improving lately, which has led to some positive developments in mortgage rates.

On May 10, we received encouraging news with a drop in the Consumer Price Index (CPI) inflation report. And, that good news is expected to continue.

Over the next two months, we can expect further improvement to our inflation situation, which will likely have a beneficial effect on mortgage rates.

In this blog post, we'll explore the connection between inflation and mortgage rates, and discuss why it may be wise to act sooner rather than later when considering a home purchase.

Frankly, if you read no further what you need to know is improving mortgage rates will increase buyer demand into a very tight inventory environment. It's already creating multiple offer situations.

It might be wise to get ahead of this positive news and act sooner than later on purchasing a home.

With that said, here are 7 Things to know about inflation, mortgage rates, and our real estate market. 👊

1. The Role of Inflation

When it comes to mortgage rates, the Federal Reserve takes a backseat to inflation. Inflation, the rise in prices over time, plays a significant role in determining the interest rates lenders charge on mortgages. Currently, inflation is showing signs of improvement, and this has a positive impact on mortgage rates. It's like a balancing act between rising prices and the affordability of borrowing money for a home.

2. The Drop in CPI Inflation:

A noteworthy event occurred on May 10 when the Consumer Price Index (CPI) inflation report showed a promising drop. This drop indicates a slowdown in the overall increase in prices. It was less than expected/ Hoped for, but still trending as expected.

It's like a breath of fresh air in a market that has seen upward pressure on costs. This development has provided some relief and potentially opened doors for more favorable mortgage rates..

3. Expectations for Further Improvement:

The good news continues as experts predict further improvement in inflation over the next two months. This projection suggests that inflation will continue to stabilize and potentially decrease, creating a more favorable environment for mortgage rates. It's like a path opening up, leading to greater affordability and opportunities for homebuyers.

4. Increased Buyer Demand and Tight Inventory:

Improving mortgage rates have the potential to increase buyer demand, but there's a catch. The housing market currently faces a challenge with tight inventory.

Simply put, there aren't enough homes available to meet the demand from buyers.

When mortgage rates improve, more buyers may be motivated to enter the market, intensifying the competition for limited housing options. This highlights the importance of acting promptly to secure a home before the demand escalates further.

5. Act Sooner Than Later and Secure Your Home:

Given the positive expectations for inflation and the potential impact on mortgage rates, it's advisable to take action sooner rather than later when considering a home purchase.

Waiting for a more opportune moment may result in missing out on the current favorable conditions - ie: less buyer competition and seller concessions.

With buyer demand increasing and inventory being limited, acting promptly can give you a competitive edge in finding and securing your dream home.

7. Conclusion:

Understanding the relationship between inflation and mortgage rates empowers you to make informed decisions. As inflation shows signs of improvement, mortgage rates have the potential to become more favorable.

The recent drop in the CPI inflation report is a positive development, and expectations for further improvement in inflation are encouraging. However, the tight inventory and increased buyer demand present challenges. Therefore, it's wise to act promptly when considering a home purchase. Seize the opportunity, secure your home, and take advantage of the current positive trends in mortgage rates.

Again, if you read no further what you need to know is improving mortgage rates will increase buyer demand into a very tight inventory environment. It's already creating multiple offer situations.

It might be wise to get ahead of this positive news and act sooner than later on purchasing a home.

Justin H. Gazabat
Seattle Real Estate Broker
www.justingazabat.com
Broker | Residential Marketing Specialist
Ballard | Seattle | PNW

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