Mortgage Rates – the price of Mortgaged Backed Securities (MBS) continued their decline this week in response to higher than anticipated inflation reports. Mortgage rates are up by 0.5% from this time last year.
Inflation – the Producer Price Index (PPI), which measures wholesale or producer inflation, rose 0.3% in January. Year over year inflation fell 1% to 0.9%. This was a nice decline, but less the anticipated amount. The core rate, which strips out food and energy, rose 0.5%, hotter than the 0.1% expected. Year over year core inflation rose from 1.8% to 2% (still a solid number).
The Consumer Price Index (CPI) showed inflation rose 0.3% in January. Year over year the headline figured declined from 3.4% to 3.1%. Both of these figures came in hotter than market expectations. The core rate, which strips out food and oil, increased by 0.4% in January and remained at 3.9% year over year increase.
Housing Starts fell nearly 15% in January to a 1.33M unit annualized pace, much lower than estimates. Starts are now down on a year over year basis. Single-Family Starts, a more important measure, fell 5% to a 1M annualized pace and are up 22% year over year. Multi-family starts and permits are at their lowest levels since 2019 and 2018 respectively. While there is currently strong supply of multi-family coming onto the market the coming years will face shortage and pressure rent rolls.
Retail Sales declined 0.8% in January and when automobile sales were stripped from the reports the index still declined -0.6%. Core Retail Sales declined 0.4% and are up 2.5% year over year, the slowest pace since 2019. Roughly 34% of adults are using buy now pay later plans, which is up 12% from 2022. These purchases can be paid back in 8-week installment debts paid in 4 payments or spread over a longer term of monthly payments. This will continue to impact retail sales.
Mortgage Applications to purchase homes declined 3% last week and are down 12% year over year. Refinances fell 2% last week and are up 12% year over year.