The Drop of Inflation and the Economy
Mortgage markets lacked much activity this week despite decent gains in the stock market. Additionally, there was little change in rates and reports of low volatility over the course of the week. Experts feel the lackluster economic performance across the board was primarily caused by the pandemic. It was an unfortunate consequence of the virus, as was a drop in inflation rates. It had been thought that the inflation rate decline was keeping mortgage rates fairly low. The core personal consumption expenditures (PCE) price index, which had been a favorite indicator of the Fed, also saw small gains.
The news was not much better for housing figures which revealed that April was a bad month for real estate sales activity. This was expected due to the "stay at home" order. There is good news on the horizon, however, and we could see a sharp increase in housing activity. Southwest Florida real estate market is showing an amazing upward trend of pending sales activity in May. The reason is said to be because the public is exhibiting a pent up desire to get out of the house and enjoy life. That translates into more money being spent in communities. If this trend continues, it is possible to see a lift in those areas we just told you about, even in home sales.
So, what lies ahead for these and other industries as the world recovers from the pandemic? Experts feel the answer to that is in direct correlation to medical advances in dealing with the virus. Other factors include whether or not more stimulus money is awarded to citizens, actions by the Fed, and whether states reopen their economies. More information will be garnered when the new economic and employment reports are released at the end of this week. A key factor is what happens with inflation. Stay tuned for further details as we head into the new week.
An example of this trend occurred in April when the sales of new homes took a surprising turn upward. This is in direct contrast to the sales of previously owned properties. This gives a bit of hope to homeowners in general. However, they are currently curtailing tours of their homes because of COVID-19. Tech-minded homeowners are attempting to overcome this obstacle by offering virtual tours, as well as contactless in-person visits. The leading indicator of home sale results, the Mortgage Bankers Association (MBA) has revealed that a six-week long spike in applications has happened.
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Disclaimer: This content is for informational purposes only. Our blog is an opinion about current market conditions. NMLS #1743702 Rates, Programs, Guidelines are subject to change without notice.