The June CPI inflation report, released Thursday, indicates a continued slowdown in price growth in the United States. Consumer prices decreased by 0.1% month-over-month, and the annual inflation rate fell from 3.3% in May to 3.0% in June. This figure is lower than the projected 3.1% rate by some economists.
The inflation rate significantly influences the interest rates consumers pay to borrow money and earn on deposits. For prospective homebuyers, this report could signal an opportune time to act. Homebuyers have faced elevated interest rates in recent years, with rates peaking in 2023 at their highest level since 2000. The recent report suggests that the interest rate environment may soon change. Here, we explore what this cooling inflation means for homebuyers now.
Although mortgage rates remain elevated, the latest inflation report suggests they could soon decline. As inflation cools, the Federal Reserve is more likely to reduce its federal funds rate, prompting lenders to lower their mortgage rates.
“The Fed has a 2% inflation target,” explains Alex Blackwood, CEO and co-founder of Mogul Club, an alternative real estate investing platform. “With the cooling, we are approaching that target and moving closer to a rate cut.”
Lower mortgage rates generally result in lower monthly payments, offering significant long-term savings for homebuyers. Prospective buyers might not need to wait for the Federal Reserve to cut the federal funds rate to benefit from lower rates.
“The Fed meeting in July could signal rate cuts in September, leading to pre-emptive lower rates for homebuyers,” says Blackwood.
Cooling inflation and the potential for lower mortgage rates could also positively impact home inventory levels.
“It may prompt more would-be sellers to put their homes on the market,” explains G. Brian Davis, founder of SparkRental, a real estate investing club. “Some owners with low fixed-rate mortgages have felt locked in due to higher interest rates. Lower rates will help unfreeze the housing market by releasing pent-up housing supply from sellers who felt stuck over the last two years.”
The likelihood of mortgage rates declining alongside inflation is promising for prospective homebuyers, but it is not the only reason to consider buying now.
While there is currently buyer competition, it may be minimal compared to what could happen if inflation continues to cool and the Fed cuts rates. Lower mortgage rates could attract potential buyers who have been waiting on the sidelines, increasing competition for homes. By acting now, buyers might avoid heightened competition and improve their chances of purchasing their desired home. Additionally, sellers may be more open to negotiating prices.
The low inventory of available homes has been a challenge for homebuyers, as limited supply tends to drive prices up and reduce the likelihood of offer acceptance. However, existing home inventory has been improving in 2024. According to the Federal Reserve Bank of St. Louis, active home listings in the United States increased from 665,569 in January to 839,992 in June, a rise of over 26% in six months.
Cooling inflation could lead to lower mortgage rates and increased home inventories. Acting now might improve buyers’ chances of having their offers accepted due to less competition and more competitive home prices. Prospective buyers should explore current mortgage rates and take advantage of the favorable conditions in the housing market today.
If you are a proptech company and want to promote your products for free, go to proptechbuzz.com and submit your products. For investors or proptech buyers, sign up on our platform to stay informed about exciting updates and trends in the Proptech Ecosystem.
Explore more Proptech news at proptechbuzz.com/news, for news tips and promotions, reach out to marketing@proptechbuzz.com.
By Proptechbuzz
By Ravi Kumar
