The latest US Inflation Report highlights rising prices and shifting trends in the housing market. With inflation data exceeding expectations, economists and homebuyers remain focused on its impact on mortgage rates and real estate.
US Inflation Report: Inflation Ticks Up, Mortgage Rates Follow
Mortgage rates increased slightly over the past week as inflation data came in higher than expected. The Core Personal Consumption Expenditures (PCE) price index, which the Federal Reserve closely tracks, showed a 2.8% annual increase in February, up from 2.7% in the previous month.
The Fed has struggled to bring inflation back to its 2.0% target, a level not seen since February 2021. With inflation holding above this goal, investors now speculate on whether the Fed will maintain higher interest rates longer than expected.
Existing Home Sales Defy Expectations
Despite ongoing inflation concerns, the housing market posted an unexpected boost. Existing home sales rose 4% from January, surprising analysts who predicted a slight decline. However, sales remained slightly lower compared to last year.
Meanwhile, the median existing-home price climbed 4% year-over-year to $398,400, setting a record high for February. This price growth underscores the supply-demand imbalance, with inventory levels still historically low. The national housing supply stands at just 3.5 months, far below the 6-month threshold for a balanced market. However, inventory levels rose 17% from a year ago, offering some hope for increased availability in the coming months.
Homebuilding Rebounds After January’s Weather Disruptions
Severe weather slowed construction in January, but February’s homebuilding data painted a more positive picture. Housing starts jumped 11% from January, significantly outperforming forecasts. Both single-family and multi-family starts posted strong gains, reflecting renewed momentum in the construction sector.
Despite the surge in housing starts, building permits, a leading indicator of future construction, remained flat compared to January, aligning with expectations. The supply of new homes continues to hover near its highest level since 2007.
However, homebuilder sentiment took a surprising hit. The latest National Association of Home Builders (NAHB) survey showed a sharp drop in confidence, marking the lowest level in seven months. Builders cited tariff uncertainty and rising costs as their primary concerns.
What Comes Next?
With inflation still above the Fed’s target, investors and policymakers will closely monitor upcoming economic data.
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Tuesday: The ISM Manufacturing Index will provide insights into factory activity.
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Thursday: The ISM Services Index and the Trade Deficit Report will highlight trends in the service sector and international trade.
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Friday: The Employment Report will reveal job growth, the unemployment rate, and wage inflation—key indicators influencing the Fed’s policy decisions.
The latest US Inflation Report reinforces the ongoing struggle to control inflation. Meanwhile, the housing market remains resilient despite limited supply and affordability challenges. As inflationary pressures persist, homebuyers, investors, and the real estate industry will watch closely for the Fed’s next moves and any signs of economic shifts.
With key data releases in the coming days, markets will gain further insight into whether inflation is slowing—or if the Fed must keep rates higher for longer to stabilize the economy.
