Market Forecast: Mortgage Apps, Jobless Claims, and Consumer Price Index

Blog posted On October 08, 2018

Some markets are closed today in observance of the Columbus Day holiday.  Mortgage rates have started to trend upward in reaction to last month’s Federal Reserve rate hike.  Mortgage applications reacted to the news, with new purchase application submissions increasing and refinance application submissions declining last week.  Other market-moving reports scheduled for release this week include the weekly jobless claims report and the consumer price index.

Refinance activity is expected to contract when rates rise, and purchase activity sometimes picks up.  Home buyers who are on the fence may be more inclined to make real estate moves before rates climb. 

The weekly jobless claims report tracks changes between new and continuing unemployment claims each week.  Jobless claims have been historically low for much of the past two years.  For the week ending 9/29, initial jobless claims fell 8,000 to a level of 207,000, a 49-year low.  Continuing jobless claims dropped to 1.66 million, the lowest level since October 1973.  The unemployment rate sits at 3.8%, an 18-year low. 

The consumer price index (CPI) denotes changes in the price of a fixed basket of goods and services sold to final consumers.  The Federal Reserve uses core CPI to gauge inflation and make monetary policy decisions like interest rate hikes.  In August, the consumer price index increased 0.2% month-over-month and 2.7% year-over-year.  Core CPI, excluding food and energy, increased 0.1% month-over-month and 2.2% year-over-year.  Based on the data, consumer price appreciation has slowed somewhat.  While gasoline and rent costs increased, healthcare and apparel costs declined.  Inflation pressures continue to build driven by the tight labor market and robust economic growth. 

Sustained job growth positively impacts the housing market because gainfully employed consumers are able to finance large purchases like a home.  The consumer price index and core CPI are used by the Federal Reserve to gauge inflationary trends and make interest rate hike decisions. 

Sources: CNBC, CNBC, Econoday, MarketWatch, Mortgage News Daily