CPI, Core CPI, Housing Starts, Mortgage Applications. All of these came in today. What do they mean?
Consumer Price Index or more commonly knows as CPI is a basket of consumer goods. The Federal government basically keeps the same items in the basket. The cost of those goods to the consumer, us, is what determines the CPI. The Core CPI takes out energy and auto purchases as they feel those prices are too volatile.
October’s CPI came in at 0.3% whereas the Core CPI came in at 0.2%. And if you take a look at what the overall last 12 months has been, the Core CPI is now at 1.7%. So what does this mean? It means that over the last twelve months, it is costing us more to buy those goods. Translated the higher the cost, the more concern we are trending towards inflation. Bernanke and Company prefers that the rate of inflation to be below 2.0% year over year. This raises concerns that the market is heating up. And with the Federal government printing money, that is and will be a major concern down the line.
Housing Starts in October plunged 11.0%. Housing Starts is considered new construction-builders building new homes. Now there is probably a good reason for this. As a new home builder, without knowing if the First Time HomeBuyers Tax Credit was going to be extended, you certainly wouldn’t be building homes in a sluggish economy.
So it only makes sense that if Housing Starts fell, Mortgage Applications would fall as well especially for home purchase applications. We should see improvement in applications for purchases over the next few weeks since President Obama signed into law the extension of the First Time Homebuyers Tax Credit and added in the Move-up Buyers Tax Credit.
What does this mean to you? Yes, it is costing a bit more to purchase your basic goods. And yes, it is still a good time to buy a home or refinance your home. Home values are down but you don’t want to wait until inventories get so low that pricesjump up. And with Bernanke and Company slowing down and ending the purchasing of Mortgage-backed Securities by the end of 1st Quarter 2010, mortgage interest rates will start going up.
Don’t get caught in a double-whammy–higher values and higher mortgage interest rates as you may price yourself out of the market or have to settle for a lesser valued and/or smaller home than you wanted.
If you aren’t sure if you qualify for the First Time Homebuyer Tax Credit or the Move-up Homebuyer Tax Credit, I created this Home Buyer Tax Credit fact sheet.
And please feel free to contact me with your questions or concerns. I am here to assist you in any way I can.
As always, I will report daily on twitter @mmtgsolutions on the mortgage interest rates and what to expect for the day.If one of these reports moves the market in a significant manner, I’ll write about it here.
Please remember, I welcome your comments to this and my other posts.
Have an inspired week.
Betsy Moore
