Inflation Eases: A Boost for Buyers as Mortgage Rates Hit New Lows

The latest inflation report provided positive news for mortgage markets, confirming the anticipated decline in the annual rate. Along with signs of slower economic growth, this helped bring mortgage rates down to their lowest levels since early December.

Core Inflation Slows as Expected

The Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditures price index, showed continued improvement. In January, core Personal Consumption Expenditures rose 2.6 percent from a year ago, down from 2.9 percent in December. This matched forecasts and marked the most progress toward the Federal Reserve’s target of 2.0 percent in quite some time. For real estate, easing inflation is a welcome sign. Lower inflation reduces pressure on interest rates and supports more favorable conditions for home loans. Buyers may benefit from improved affordability, while sellers could see renewed activity from rate-sensitive buyers.

Consumer Confidence Drops to Multi-Year Low

The consumer confidence index published by the Conference Board declined sharply to 98.3 in February, the lowest level since June 2024. This was also the largest monthly drop in over three years. Lower-income households expressed the most concern, particularly over rising prices and fears that new tariffs could drive up costs even further. Confidence in future employment conditions also worsened. For the housing market, declining consumer confidence may temper some buyer enthusiasm. However, lower mortgage rates could balance that hesitation and continue to support overall demand. Sellers should be aware of these shifts and consider buyer sentiment when pricing and preparing homes for sale.

Jobless Claims Rise but Stay Within Normal Ranges

Weekly jobless claims rose to 242 thousand, up from 219 thousand the week before and above expectations. This is the highest level since early October, but still well below the levels recorded during the early stages of the pandemic. For real estate, a slight rise in jobless claims may indicate a softening labor market. While not yet alarming, buyers and sellers should monitor employment trends, as job security plays a key role in home purchase decisions.

New Home Sales Fall Sharply Amid Winter Storms

New home sales fell 11 percent in January compared to December, coming in well below expectations. Most of the decline was concentrated in the South, where extreme winter weather limited activity. Despite the slowdown, the median price for a new home rose to a record 446,300 dollars, up 4 percent from a year ago. The supply of new homes reached its highest level since 2007. For buyers, growing inventory of new homes may offer more options and room for negotiation. Builders may also provide incentives to encourage sales. Sellers of existing homes should remain mindful of competition from new construction and price their homes accordingly.

What This Means for Real Estate

Slowing inflation and softening rates are creating favorable conditions for homebuyers. For buyers, this may be an ideal time to act before conditions shift again. For sellers, the combination of improved affordability and steady demand presents an opportunity, but flexibility and awareness of buyer sentiment will be essential.

Understanding these broader economic trends can help you make well-informed decisions in any real estate market. Whether you are planning to buy or sell, staying informed is your strongest advantage.