‘The gate is beginning to open’: Inflation drop aids buyers

‘The gate is beginning to open’: Inflation drop aids buyers

The once-frantic pace of consumer price growth has been slowing for months, which may bode well for buyers’ budgets — and their financing, according to new data from the U.S. Bureau of Labor Statistics.

Inflation continued to decelerate from its once-worrying heights to close the year, with prices actually dropping slightly in December.

Consumer price growth cooled to a 6.5 percent annual increase last month, down from the 9.1 percent year-over-year growth reported in June, according to Thursday’s report from the U.S. Bureau of Labor Statistics. Prices declined by 0.1 percent from November to December.

It’s a development that could improve the odds of mortgage rates eventually falling below 6 percent once again, Lawrence Yun of the National Association of Realtors said in a statement.

“The gate is beginning to open for homebuyers who got shut out in October and November when the rates went above 7%,” said Yun, the group’s chief economist. “However, there is still a housing shortage and not enough listings.”

If the fall in prices continues, it could persuade the Federal Reserve to back off its ongoing policy of interest rate hikes earlier than expected, removing some of the upward pressure on mortgage rates in the long run.

And as home prices continue to fall, more affordable options in the months to come may draw more buyers back into the market.

But those lower prices have yet to show up in the government’s estimate of housing inflation. 

Yun expects government housing price estimates to start slowing soon as well, he said. These government measures of the price of housing for renters and homeowners have yet to reflect some recent developments in the market, especially for renters, he said.

“Private sector data in recent months have been pointing to near-zero rent growth in some major cities, and robust apartment construction will raise rental vacancy rates,” Yun said in the statement.

The slowdown in price growth in recent months has been driven largely by a big reversal in gas prices at the pump, which fell another 9 percent from November to December. The prices of used cars and trucks continued to decline as well.

Americans also spent about 3 percent less on health insurance in December than the month before, offering more relief in that area of household budgets.

Still, in many key areas inflation remained stubbornly high. Stripping out the volatile prices of food and energy, U.S. households saw a 0.3 percent monthly increase in the remaining core inflation categories.

The cost of groceries also continued to climb, rising 0.2 percent from the previous month.

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