Tomorrow's Inflation Report: What Home Buyers Should Know

So far this week, we have one major piece of two pieces of inflationary numbers coming in this week, and it came in much, much better than expected. Let's get to the headlines that we're seeing right through here. It says Dow Jones rises more than 200 points on Tuesday after wholesale inflation reports come in light. Light? It came in half of what was expected. So let's get over to the economic news we have right through here. The news we got so far today was on the producer side of the equation. So today we got producer inflation. Tomorrow, we're going to get the consumer inflation, and it breaks it down much more. So today's numbers, though, look at where they came in at. Previous reading on the producer inflation was it was up 0.4 month over month. Well, they expected it to stay in that tune at 0.4 month over month. It actually halved. It came in at 0.2. So the market's reaction, well, we just saw it here, but what did bonds do? So we go over to the bond market. The bond market did absolutely nothing, and I'll get to that in a second. The reason why? Well, tomorrow we have a bigger number even coming in, the consumer inflation number. Now, the Federal Reserve puts a lot more weight on this than it does the producer side, and we break it down into three pieces. We break it down into core CPI, which means it strips out food and energy, and it gives us a month over month figure, and then it's going to tell us year over year CPI numbers and then month over month just the normal CPI. So what the economists are expecting is right through here. Core CPI to go from 0.3 to stay stagnant at 0.3. The year over year CPI to go from 2.7 to 2.9. I'm hoping that doesn't happen because if it does happen, you'll see the market selling off tomorrow and rates going even higher. But the CPI month over month, 0.3 to go to 0.4. I'm going to say that this is going to be stagnant, and we're also going to stay at a 2.7, or I'm hoping that we stay at a 2.7 CPI year over year. And some of the reasons behind this that might not make this really happen is right through here. The budget deficit rose in December. Once again, it is now 40% higher than where we were last year. Okay, 40% higher on our national deficit. It means the government is still spending and spending. This has to come under control for everything else to work. Okay, so that's where we're hoping tomorrow's print on the inflation numbers are a little bit short of what was expected. Otherwise, you're going to see major deterioration in the market. So we're going to wait and see what happens tomorrow on this. Right through here, here's how the bond market reacted today on the PPI number. And again, remember, this came in at half of what was expected. And the market really didn't do anything. It plummeted right out of the gate, and it stayed down there all day long. So hopefully the reaction tomorrow to the CPI is a little different, and hopefully we get some better news tomorrow. On a good news note, we have over here, home prices continue to escalate in value. Now we're seeing Q4 alone saw increase in house prices of 5.8%. And some more good news, I don't know how long this one's going to last, because all the fires in the West Coast and everything else is right through here. We're also seeing residential construction costs going down. Okay, so that's that part of the equation. So my forecast for today is if you're a lender, and you have a borrower you're working with, I would highly suggest you locking in the rates, because we want to err on the side of caution. I don't know how these numbers are going to come in tomorrow. I didn't expect the PPI number to come in at half what economists were expecting. So are we going to get a shock tomorrow? I hope if we do get one, it is a shock on the downside of things. Because if you see that, you'll see a nice little rally in the stock market, and you'll see interest rates coming off their highs right now. But if this number shows more and more aggressive inflation on the consumer side of the equation, all bets are off. You're going to see the stock market and the equity markets crumble, and you're going to see mortgage rates, probably the 10-year yield, hit five percent, and you'll see mortgage rates go up accordingly. So be careful if you're floating overnight into tomorrow's market. But if you want to get a context of what I'm talking about, I'll have today's newsletter, I promise you, down below in the comment section or the description section. So you can break this down, see what happened today, check out some videos on here, and then also look at the economic calendar on what's in store for the rest of the week. So my name is Dan Frio. I'm actually a licensed loan officer throughout the entire country. So if you're out there trying to buy that first house, maybe that first investment property, or even maybe looking to refinance at some point, how about this? Would you like to work with somebody that you can put in one application, have your credit pooled just one time, and get quotes from up to 30 different lenders? How do you do that? Well, you do it right here at The Rate Update. Who am I? My name is Dan Frio. I work at ServBank. We're the number 10 largest mortgage servicer in the country, but we're also a mortgage broker, which is really odd in this environment. So we're set up with 30 other lenders. We can use their products, their interest rates, to pass on to you to make it that you're only putting in one application, one credit pool, and we're going to shop your loan to over 30 different lenders. So thanks so much for watching, guys. Please check out today's video. And also, I want to send a special thanks and prayers to Rick. He's a friend of mine. We had a live event today, and Rick has prostate cancer. They did find it early. So keep Rick in your prayers. Everything should be okay, but you never know what tomorrow is going to bring. So thanks so much for everything you do, Rick, and also for being on our channel and also a friend. So thanks so much. Prayers with you, my friend. Take care. God bless, folks, and I'll see you tomorrow. Bye-bye.