Consumer Prices & Interest Rates Fall

According to a report in the Wall Street Journal consumer prices in the U.S. fell in November. Labor Department data reveals that the index of consumer prices fell 0.3 percent in November this was after a slight increase the month before. The Consumer Price Index (CPI) is a means of measuring a “basket” of goods that may include anything from “groceries to hospital stays.”

The WSJ mentions one of the key factors in this decline has been the 7.4 percent drop in the cost of gasoline in November; this was the greatest decrease in gasoline prices in nearly four years. Data on retail fuel costs show that gasoline prices had fallen in eight of the previous nine weeks. Overall energy costs fell 4.1 percent in November.

Information from The Dow Jones Newswires reveals that economist expected that core prices on items, that excluded the volatile food and energy sectors, would increase 0.2 percent, while overall costs would decline 0.2 percent. The actual decline, as noted above, was slightly greater.

Food costs rose 0.2 percent, which was the sixth consecutive monthly increase. The rise in food costs followed the rise in fuel cost over much of that period.

When looking at the year-over-year figures consumer prices rose 1.8 percent with the core prices rising 1.9 percent.

The WSJ report notes that the Federal Reserve has a target annual inflation rate of around 2.0 percent. The report further notes that, “mostly mild inflation has allowed the central bank to keep interest rates near zero since late 2008.” The intention by the Federal Reserve is to stimulate the economy and keep prices from spiking.

Over the past four years Federal Reserve actions have helped keep mortgage interest rates at historic lows. Proof of this is that, as of this writing, mortgage interest rates on 30-year fixed-rate non-FHA conforming loans have hit their lowest point historically; this according to the Mortgage Bankers Association (MBA).

The MBA survey data shows, “the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.47 percent…down from 3.52 percent.” The MBA states that this is the lowest rate since this interest rate survey has been taken.

With interest rates at historic lows and home prices rising in most of the metro markets, potential homeowners should not delay in making sure that they can start the new year by becoming true homeowners…this is an opportunity that should not be ignored.

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