Elevated

mortgage
rates
have
stymied
the
housing
market,
but
underlying
economic
factors
are
likely
to
help
propel
them
downward
in
the
coming
months.

The
Consumer
Price
Index
(CPI)
for
August
showed
a
modest
year-over-year
gain
of
2.5%,
which
is
the
lowest
annualized
growth
figure
since
February
2021.
Shelter
costs
—
which
are
weighted
as
one-third
of
the
index
—
drove
much
of
the
increase,
rising
0.5%
compared
to

compared
to
July
and
up
5.2%
year
over
year.

Despite
the
overall
inflation
rate
decrease,
core
inflation
—
which
removes
more
volatile
food
and
energy
costs
from
the
top-line
index
—
rose
0.3%
month
over
month
and
3.2%
year
over
year.

With
another
report
showing
that
the
rate
of
inflation
is
falling,
it’s
all
but
guaranteed
that
the


Federal
Reserve
will
cut
benchmark
interest
rates
next
week.
But
the
cut
will
likely
be
modest
due
to
the
unexpected
acceleration
of
core
inflation,
and
the
mortgage
market
has
already

priced
in
the
rate
cut.

“The
year-over-year
CPI
inflation
data
has
told
the
same
story
for
18
months:
the
inflation
growth
rate
has
been
falling,
and
headline
inflation
is
almost
back
to
2%
on
the
year-over-year
data,”

HousingWire
Lead
Analyst
Logan
Mohtashami
said.

“The
month-to-month
core
inflation
print
was
hotter
than
expected
because
of
our
terrible
way
of
tracking
rent
inflation.
Mortgage
rates
have
moved
almost
2%
lower
since
the
highs
of
2023
as

labor
data
has
gotten
softer.”

While
the
rate
of
shelter
inflation
is
driving
the
movement
of
the
overall
index,
it’s
down
significantly
from
its
peak
of
8.2%
in
March
2023.
Still,
the
monthly
gain
of
0.5%
is
the
highest
rate
since
the
beginning
of
2024.

Housing
costs

were
mentioned
during
the
presidential
debate
Tuesday
night.
It
was
the
first
issue
that
Vice
President
Kamala
Harris
addressed
in
her
opening
remarks
and
was
mentioned
repeatedly,
although
there
were
no
housing-related
questions
from
moderators.

Harris
mentioned

her
plan
of
providing
$25,000
in
down
payment
assistance
for
first-time
homebuyers.
She
also
said
that
climate
change
has
caused

homeowners
insurance
premiums
to
rise
while
identifying
the
housing
shortage
as
a
cause
of
rising
prices.

Republican
nominee
Donald
Trump
did
not
address
housing
costs
in
the
debate.
But
he
has
previously
said
his
plan
to
deport
immigrants
will
soften
demand
for
housing
and
thus
bring
down
costs.
Economists
have
expressed

heavy
skepticism
of
that
plan.

In
the
near
term,
mortgage
rate
cuts
will
provide
the
most
direct
impact
on
housing
costs,
but
the
mild
acceleration
in
core
inflation
will
likely
prevent
the
Fed
from
cutting
rates
significantly.
Meanwhile,
the
rate
decline
that’s
already
occurred
has
not
brought
a
significant
number
of
buyers

back
into
the
market.

“Prospective
homebuyers
expecting
mortgage
rates
to
drop
dramatically
after
the
Fed
cuts
rates
will
be
disappointed,”

Bright
MLS
chief
economist
Lisa
Sturtevant
said
in
a
statement.
“The
impact
of
the
Fed
lowering
short-term
rates
has
already
been
largely
baked
into
mortgage
rates,
which
have
been
falling
since
early
July.
High
home
prices
and
a
lack
of
supply
continue
to
be
driving
affordability
challenges
in
the
market.”

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