Inflation cooled for a second consecutive month in July, easing one of the pressures that pushed mortgage rates higher this summer without yet
giving the housing market a clear path to lower borrowing costs.
The Consumer Price Index increased 0.1% in July after declining 0.4% in June, according to the U.S. Bureau of Labor Statistics. Consumer prices
were 3.4% higher than a year earlier, down from a 3.5% annual increase in June and 4.2% in May.
Core inflation, which excludes food and energy, increased 0.2% during July and 2.5% over the preceding 12 months. The annual core rate declined
from 2.6% in June and remained near its lowest level since early 2021.
For mortgage professionals, the report offers something short of rate relief: a lower probability that renewed inflation will force borrowing costs
sharply higher again.
“Two softer inflation reports in a row should calm concerns that price pressures are reaccelerating,” First American Senior Economist Sam
Williamson said. “For home buyers, that reduces the risk of another sharp move higher in mortgage rates and provides a little more certainty
around borrowing costs.”
Shelter Inflation Continues To Ease; Shelter costs increased 0.1% in July and accounted for roughly two-thirds of the monthly increase in the allitems index, according to the BLS. Rent and owners’ equivalent rent each increased 0.3%, while lodging away from home declined 2.8%.
Shelter prices were 3.2% higher than a year earlier, down from a 3.3% annual increase in June. Because the government’s shelter measures
reflect rents across a broad stock of existing leases, they typically respond more slowly than asking rents on newly available units. Williamson said
the subdued growth in asking rents suggests official shelter inflation still has room to moderate.
That matters for the mortgage market because shelter represents a substantial share of core CPI. Continued easing could help hold down future
inflation readings even if some service-sector prices remain sticky.
Medical care increased 0.4% in July, airline fares rose 2.2%, and communication costs increased 0.6%. Those gains were partly offset by lower
prescription-drug and lodging prices. Energy prices declined 1.5% during the month, led by a 2.9% drop in gasoline. Energy remained 14.7% more
expensive than a year earlier, however, leaving the inflation outlook vulnerable to renewed oil-market volatility…
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