Is now a good time for an international trip? The full faith and credit of the US government continues to draw international demand despite inflation. The current yield on US Treasury bonds brings in foreign investors who need to exchange their currency to USD to purchase UST. This foreign exchange increases the demand for the dollar, helps our buying power abroad, and lowers the price of imported goods. On the other hand a strong dollar hurts demand for US exports and can cause international companies (including US based ones) to layoff US workers because it is more cost effective to manufacture elsewhere.

Mortgage Rates fluctuated widely this week as the price of Mortgage Backed Securities continues to be extremely volatile – dropping well below the recent trading pattern. Rates are up over 3.25% from this time last year.

Inflation – the Fed’s favorite measure inflation, the Personal Consumption Expenditures Price Index (PCE), rose by 0.3%. Year over year the index is up 6.2% which is a slight decline from last month’s reading of 6.4%. The core rate, which strips out the more volatile food and energy prices, is up 4.9% on a year over year basis which is an increase of 0.2% from last month’s reading. The Fed’s target for the core rate is a more neutral 2%.

Jobs – the number of people filing for unemployment for the first time decreased again this week and is now under 200K.

Mortgage Delinquencies– creeped up on a month over month basis but are down on a year over year basis for the 16th consecutive month. Loans in foreclosure continue to make up a miniscule 0.3% – remember that over 1/3 of homes are owned free and clear.

Rents declined 0.2% this month which is the first decline this year. The timing of decrease is consistent with seasonal trends. Rents are up 7.5% year over year.

Mortgage Applications to purchase homes fell by 0.4% last week and are down 29% on a year over year basis. Refinance applications declined nearly 11% and are down 84% year over year.

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