Podcasts Business Investing Real Estate News: Real Estate Investing Podcast The Real Estate News Brief: Mixed PCE Inflation Report, Q1 Economic Growth, Argentinas Sky-High Inflation

The Real Estate News Brief: Mixed PCE Inflation Report, Q1 Economic Growth, Argentinas Sky-High Inflation

Published: May 2, 2023, 1:33 a.m.

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In this Real Estate News Brief for the week ending April 29th, 2023... you\\u2019ll get mixed news on inflation, results for the first quarter GDP, and a rate hike in South America that you never want to see here!
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Hi, I\'m Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review.
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Economic News
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Let\\u2019s begin our economic review with the latest inflation report. The Personal Consumption Expenditure Index for March was released on Friday and showed a tiny .1% increase in overall inflation. That brought the yearly rate down from 5.1% in February to 4.2% in March \\u2013 the lowest it\\u2019s been since May of last year. But unfortunately, the news wasn\\u2019t as good for the PCE\\u2019s core rate. When you omit prices for food and gas, the core rate rose .3%, and brought the annual rate down from 4.7% to 4.6%. As MarketWatch reports, the core rate hasn\\u2019t changed much for the last five months. (1)
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The PCE is the Fed\\u2019s preferred inflation gauge, and will be an important factor in determining whether to hike interest rates again this week. It\\u2019s generally believed that the central bank will hike rates another quarter point, but it\\u2019s a delicate situation because the economy is teetering on the brink of a recession. As Bill Adams of Comerica told MarketWatch: \\u201cThe Fed is stuck between raising interest rates and likely pushing the economy into a recession\\u2026 or pausing and risking that inflation accelerates in a few quarters if the economy regains momentum and sticky prices stay high.\\u201d
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First quarter GDP is out. It shows the economy grew at a rate of 1.1%. That\\u2019s down from a GDP of 2.6% in the fourth quarter. Consumer spending has been strong, but was offset by spending cautiousness among businesses. Home construction and sales are also a drag on the GDP, thanks to higher mortgage rates. But MarketWatch says the biggest impact on the GDP was a lack of inventory growth. Business inventories were down $138 Billion. If that had not been the case, and inventory growth remained flat, the GDP would have reportedly been much higher, at 3.4%. (2)
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Jobless claims reversed course this last week and fell an unexpected 16,000 to a seasonally adjusted 230,000. Economists had expected them to rise slightly. The report shows that the job market is still strong, which feeds into the Fed\\u2019s concern about inflation. Continuing claims were also down 3,000 to 1.86 million. (3)
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Housing demand and a lack of existing home inventory drove new home sales higher in March, despite high mortgage rates. The Commerce Department says they were up 9.6% for the month, to a seasonally adjusted annual rate of 683,000. The surge was mostly driven by new home sales in the Northeast. The median price for a home was $449,800. Chief Economist, Lisa Sturtevant, at Bright MLS, says that about one in three homes for sale are new builds. Historically, it\\u2019s more like one in 10. (4)
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Although the sale of existing homes has been rising over the last several months, they fell in March. The National Association of Realtors says contract signings were down 5.2% for the month which is more than economists had predicted. NAR says about a third of the listings are seeing multiple bids, and 28% are selling for more than the asking price. (5)
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The February report on home prices by Case Schiller shows the national index was up .2% for the month, and 2% for the year. That\\u2019s the smallest increase in home price growth since 2012. (6)
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Mortgage Rates
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NAR says that realtors are predicting that mortgage rates will hit 6% this year, and 5.6% next year. But they aren\\u2019t there yet. Freddie Mac says the average 30-year fixed rate mortgage was up 4 basis points this last week, to 6.43%. The 15-year was down 5 points to 5.71%. (7)
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In other news making headlines\\u2026
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Study: Home Demand Rises After Periods of High Inflation
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The desire to own a home will likely increase thanks to inflation. The results of a new study by UC San Diego show that the inflation we\\u2019re seeing today will have a lasting impact on the housing market, with many people buying homes to protect themselves from future price growth. The study claims to be the first of its kind to show that personal experience with inflation will lead to home ownership. (8)
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One of the study co-authors says: \\u201cWe think one reason people choose to buy instead of rent is because they are worried about future inflation, which may drive up both rent and house prices.\\u201d She says: \\u201cOur paper suggests that cohorts living through the current inflationary period will have a higher demand for housing for years to come.\\u201d
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Huge Rate Hike in Argentina as Inflation Soars
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As the American consumer worries about inflation and another rate hike when the Fed meets this week, consider this:
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The Argentina central bank just hiked short-term rates 300 basis points to an annual rate of 81%! That\\u2019s in response to surging inflation that hit 104% in March.
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Argentine officials had hoped to cut rates this year after a difficult tightening cycle in 2022, but inflation has returned with a vengeance. Argentina has one of the world\\u2019s highest inflation rates right now. JP Morgan is predicting that Argentina\\u2019s inflation will hit 130% by the end of the year. (9)
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That\\u2019s it for today. Check the show notes for links at newsforinvestors.com. You can also join RealWealth to learn more about real estate investing by hitting the \\u201cJoin for Free\\u201d button. And please remember to hit the subscribe button, and leave a review!
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Thanks for listening. I\'m Kathy Fettke.
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