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Inflationary pressures easing in this week’s Markets in a Minute!

Inflationary pressures easing in this week’s Markets in a Minute!
May 11, 2018 Fred Kreger




For the Week Ending May 11, 2018


Since last week there has been a lot of talk about the latest unemployment report. The rate of unemployment hit a 17-1/2 year low at 3.9 percent. As eye catching as that number is, when you dig into the data, the report is not quite as rosy as the headline indicates.

The reason for the decline due less to an increase in hiring, and more on account of people abandoning their search for work and leaving the labor force. Despite the decline, the employment sector is very strong and continues to grow. The reality is that there are far more jobs available than people looking for them. Employers biggest complaints as of late is their inability to find qualified candidates to fill their empty positions.


Mortgage Financing:

We are now in the 5th straight week of mortgage activity declining. The latest data from the Mortgage Bankers Association shows applications for purchase loans dropped by a slight 0.2 percent. Refinances declined 0.6 percent. Mortgage rates have inched up lately and that can be playing a role of the downward movement in applications. Additionally, purchase applications continue to be held down because of extremely tight housing inventory, which shows no signs of easing any time soon.


What is good news for the housing industry is that a recent report released by the real estate marketplace Zillow, is that the rate of would-be-borrowers getting turned down for mortgage financing is almost half of what it was ten years ago.


Inflation and Interest Rates:

Although the Fed left interest rates alone after the last meeting, the likelihood of more interest rate increases is growing. The latest data on inflation is showing that the Fed target rate of 2.0 percent annual inflation has not only been reached, but is now being exceeded.


The latest report on wholesale and retail inflation show them now running at an annualized pace of 2.6 percent and 2.5 percent respectively. This now moves the Fed language relating to inflation into the “moderate” category which is basically a guarantee that at the next Fed meeting interest rates will be raised. The Fed will likely increase rates only .25% because despite the pace of inflation increasing, wage growth still remains almost flat.


Next week’s potential market moving reports are:

• Tuesday May 15th – Retail Sales, Housing Market Index
• Wednesday May 16th – MBA Mortgage Applications, Industrial Production, Housing Starts
• Thursday May 17th – First Time Jobless Claims


As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends. I welcome the opportunity to serve you in any way I possibly can.


Please enjoy this quick update on what happened this week in the housing and financial markets.



The consumer price index, which measures inflation, was slightly lower than expected in April. Lack of inflationary pressure helps keep rates lower.
The producer price index was also a bit lower than April’s forecast, another sign of lower inflation pressure. Prices rose 0.1% instead of the expected 0.3%.
Oil prices continue to rise, hitting the highest levels since 2014. Increasing oil prices could push rates higher.


In response to new tax code limits on property tax deductibility, NJ has enacted legislation to let homeowners declare property taxes as charitable donations.
Could more inventory start hitting the market? In a recent FannieMae survey, 45% of respondents said it’s a good time to sell, a new survey high.
Amazon’s Alexa system is gaining ground in powering smart homes. New home builder Lennar announced plans to include the technology in all new homes.

Never criticize someone until you have walked a mile in their shoes. That way, when you criticize them, you’ll be a mile away and you’ll
have their shoes.


Rate movements and volatility are based on published, aggregate national averages and measured from the previous to the most recent midweek daily reporting period. These
rate trends can differ from our own and are subject to change at any time.


Fred Kreger
American Family Funding
Certified Mortgage Consultant
NLMS # 1850 / 214640 BRE# 01215943 / 01371184
(661) 505-4311
28368 Constellation Road
Suite 398
Santa Clarita, CA


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