Ever wonder why bananas are inflation resistant, what a flat-rate income tax would look like or if we should move to 24-hour trading? This article discusses these topics. Spoiler – the flat rate income tax would be balanced by eliminating some of the major credits and deductions.
Mortgage Rates improved again this week as the price of Mortgaged-Backed Securities (MBS) continues to rise. We are now at the lowest rates we have seen since October of last year. Rates are down 0.25% from this time last year.
Inflation – the Fed’s favorite measure of inflation, the Personal Consumption Expenditures (PCE) rose 0.33% in January but dropped down 0.1% to 2.5% year over year. The Core reading dropped form 2.9% to 2.6% which is getting closer to the Fed’s goal of 2%. Shelter continues to be a major contributor to inflation showing a year over year increase of 4.5% (a slight decline from the previous report of 4.7%).
Loan Performance – In December delinquencies remained at 3.1%. Loans in serious delinquency (90+ days) were only at 1% and foreclosures are near a multi-decade low of 0.2%. Remember that over 1/3 of homes are owned free and clear so this report only applies to homes with loans. Continued appreciation keeps foreclosure rates extremely low in spite of inflation.
Home Values – the gold standard of appreciation, the Case Shiller Index showed that home prices rose 0.5% in December. Home prices are up 3.9% year-over-year. This means that the average US home purchased in December of 2023 for $500,000 is worth over $520,000 now.
Mortgage Applications – to purchase homes are up 3% year-over-year while refinance applications are up 45% year-over-year.