CPI is Wednesday, mortgage rates are stuck above 6.5 percent and the housing market is paying the price
The math is brutal for homebuyers, analysts say
The single most important consumer number of the week arrives at 8:30 a.m. ET Wednesday, when the Labor Department releases the May Consumer Price Index.
April CPI was up 3.8 percent over the year, well above the Federal Reserve’s 2 percent target, and the consensus is for a similar print in May with rising risk to the upside given that the energy shock is now four months deep. PBS reported over the weekend that mortgage rates “are staying high” and the Fed “can do little about it” so long as the war keeps pushing oil and the 10-year Treasury yield higher.
The mortgage data, taken together, paints a stark picture.
Bankrate reported the 30-year fixed-rate mortgage at 6.52 percent late last week, having drifted lower from a war-era peak above 6.70 percent but still well above the 2026 low of 6.09 percent reached just before the war began. Curinos pegged the average fixed home equity loan rate at 7.86 percent and the average HELOC rate at 7.25 percent Monday morning, with home equity loans rising sharply through May while HELOCs hovered near their annual lows.
Bankrate’s chief financial analyst told the publication that housing economists “no longer expect mortgage rates to fall below 6 percent in the near future,” a hard reset of consensus that began the year expecting cuts.
Brutal math
For shoppers walking into the housing market this summer, the math is brutal. The difference between the pre-war 6.09 percent and today’s 6.52 percent works out to roughly $112 a month on a $400,000 mortgage and about $40,400 over the life of the loan.
The week ahead has Casey’s General Stores reporting Tuesday and Chewy, Oracle and Adobe reporting Wednesday — early reads on whether households at varying income levels are still showing up.
The retail picture has been bifurcating for months. Casey’s analysts expect 28.9 percent earnings growth year-over-year as Midwesterners squeeze more gallons through its convenience-store-and-pizza model. Stitch Fix, which reports Wednesday afternoon, is expected to post another loss, a reminder that the discretionary apparel category remains in retrenchment.