Home Buyers Say 5.500% Is Their Magic Mortgage Rate – That’s the
mortgage rate threshold at which many would-be buyers would jump
back into the market, according to a survey from John Burns Research
and Consulting.
71% of prospective home buyers say they won’t accept a rate on a 30-
year mortgage above 5.5%, the survey shows. While the interest rate
on the 30-year loan eased to 7.12% this week, it has averaged above
7% for four consecutive weeks, Freddie Mac reports.
The UAW strike is the big news as the potential impact if it is prolonged
could have an impact on inflation reports (think used car sales prices
going up due to lack of demand and impact on CPI.
That is what bit us hard back in the all-important May reading which set
us back a few months). Hopefully they can come to terms quickly, but
appears they are miles apart right now.
BONUS FROM Barry Habib
Talking Inflation with my Father
My dad loves to ask me economics questions. And I love answering him
because: 1) he’s my Dad, and 2) the conversation always gives me good ideas.
Below, I’ve paraphrased the discussion we had last week about inflation.
Perhaps it’s helpful to you too?
Dad: I keep reading in the papers that inflation is going down, and I don’t know
what the hell they’re talking about! My grocery bill is twice what it was a few
years ago, they basically doubled my property tax, and a 12-pack of Coke costs
almost $12. It used to be $7 or $8.
Me: When they say that inflation is going down, they’re not saying that prices are
going down. They’re saying that the rate at which prices are going up is slowing.
Nobody expects that prices are going to return to where they were before the
pandemic, unless we have a nice, chunky recession.
Dad: And what’s the difference between headline and core inflation?
Me: Headline inflation measures the increase in the prices of ALL the items in the
CPI basket: rental rates, dog food, bacon, gas, tennis shoes, doctor’s visits,
beer..everything. Core inflation is all that, but strips out energy and food prices.
‘Energy’ means gasoline prices, electricity, propane for the barbecue tank, etc.
Dad: That doesn’t make any sense to me. Why would you ignore gas and
grocery prices? Those are two of the things that hit people the hardest!
Me: Well, I agree with you there. To me, headline inflation is what real
people feel. But there are two reasons the statisticians do it. First, gas and
grocery prices can be really volatile from month to month. That could screw up
the signal-to-noise ratio from the data. Second, the Federal Reserve can’t really
influence gas or grocery prices with interest rates. Russia invades Ukraine and
grain prices go up. Saudi Arabia cuts oil production and gas prices go up. Swine
flu in China and hot dog prices go up. Nothing the Fed can do about that.
Dad: OK. Hey can you explain to me again why an inverted yield curve means
we’re going to get a recession?
Me: Next week, Dad. I gotta make dinner for the Four Horsemen.
