What the new inflation data means for home buyers

The annual rate of inflation has cooled again, the Bureau of Labor Statistics announced on Thursday. This rate fell from 3.5% in March that 3.4% in Aprilfollowed by today’s reading i 3.3% decrease in May. And that could be good news for home buyers.

The inflation rate isn’t just important to understanding how fast or slow prices are rising in the United States. It also plays a significant role in the movement of interest rates.

The Federal Reserve will conclude its June Federal Open Market Committee (FOMC) meeting later today. This is the meeting where the Fed discusses the state of the economy and any changes it deems necessary in monetary policy, such as potentially increasing or decreasing interest rates. And, today’s inflation data and the results of the FOMC meeting could have a significant impact on homebuyers. So what can you look forward to if you’re in the market for a new home?

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What the new inflation data means for home buyers

Inflation data is an important statistic for home buyers. This because changes in inflation rates can lead to changes in mortgage rates. So what does cooling inflation mean for homebuyers?

Interest rates may fall in the coming months

The Federal Reserve’s benchmark federal funds rate is currently at one High 23 years. Lenders often consider this benchmark when determining the consumer interest rates they will offer. The Fed pushed its benchmark to such a high level (through a series of several rate hikes) after the post-Covid-19 inflation hit 9.1% in June 2022.

Today’s inflation data represents a significant cooling from that 9.1% rate. So will the Fed cut its key rate after the June FOMC meeting? According to economists, a A rate cut is unlikely this month. But that doesn’t mean the federal funds rate will stay elevated forever.

“Today’s inflation is not likely to cut rates directly, but it could be a sign that inflation is slowing and as we approach the Fed’s 2% target, the inflation data gives a little more hope for an interest rate hike.” cut in the future,” explains Alex Blackwood, CEO and co-founder of alternative real estate investment platform Mogul Club.

In fact, some expect a federal funds rate cut could be coming in September — which could bode well for mortgage rates now and in the future.

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Lenders can start lowering rates now

While the Fed is unlikely to cut its federal funds rate this month, that doesn’t mean mortgage lenders will be waiting to cut their rates. Mortgage rates change regularly and the smallest bit of news can make a significant difference in those rates.

In fact, with inflation cooling for the second month in a row, lenders may already be planning to cut mortgage rates in an effort to attract new buyers. And, if the Federal Reserve hints at a cut in its federal funds rate in the near term, the likelihood that lenders will start lowering mortgage rates will only increase. So, good news may be on the horizon for home buyers.

It’s time to start shopping

With the prospect of mortgage rates falling in the near term, you may be wondering if you should hold off until that prospect comes to fruition. But, it could be a mistake. As mentioned above, lenders may soon start lowering interest rates. And, when that happens, buyers who have been waiting for lower rates can enter the market – which can increase your competition. So it might be wise to start home shopping now.

Additionally, it may be a good idea to shop the lenders now as well. Keep in mind that lenders may start lowering their rates after today’s inflation report and the Fed’s upcoming statements. So, shopping now it gives you the ability to have a lender in place when you find the home for you and take advantage of those lower rates if they materialize.

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After all

Inflation has cooled for the second month in a row, and that could be good news for home buyers. As inflation cools, lenders may begin to lower mortgage rates. But you don’t have to wait long to act. Doing so only invites more competition from the buying side, which can drive home prices higher. Instead, start shopping for a mortgage and your dream home now to stay ahead of the competition.