Inflation Eases as Home Prices Reach New Highs and Housing Activity Increases

Consumer inflation continues to moderate, while home prices hit record highs and housing market activity is on the rise, spurred by lower mortgage rates. Here’s a brief overview of key developments:

Consumer Inflation Trending Downward

In August, the Personal Consumption Expenditures (PCE) report showed headline inflation increased just 0.1% from July. Year-over-year, inflation fell from 2.5% to 2.2%. Core PCE, which excludes food and energy prices, also rose 0.1% monthly, with the annual reading ticking up slightly to 2.7%. Monthly readings remain favorable, aligning with the Federal Reserve’s goals. If recent trends continue, Core PCE could dip below the Fed’s 2% target.

New Home Sales Beat Expectations

Sales of new homes declined 4.7% in August but still exceeded forecasts with a 716,000-unit pace, the third-highest this year. July’s numbers were revised upward, showing a 751,000-unit pace—the highest of 2024 so far. Although sales activity is increasing due to lower mortgage rates, a lack of available, completed homes continues to limit buyer options.

Pending Home Sales Slightly Up

Contracts for existing homes rose 0.6% in August, rebounding from the year’s lowest level. Sales remain 3% below last year’s numbers, though economists expect lower mortgage rates to further boost contract activity.

Home Prices Hit New Record Highs

The Case-Shiller Index revealed home prices rose 0.2% from June to July, with values 5% higher than last year. This marked a new all-time high, with lower-priced homes appreciating faster due to strong demand. Home prices continue to defy negative media coverage, providing wealth-building opportunities for homeowners.

U.S. Economy Grows by 3%

The final reading for second-quarter GDP showed a 3% growth, driven by strong consumer and business investments. Expectations for third-quarter growth remain similarly strong at around 3%.

Jobless Claims Indicate Slower Hiring

Initial jobless claims fell slightly, while continuing claims rose to 1.834 million, suggesting a slower pace of hiring as employers remain cautious.

In summary, while inflation is easing, home prices continue to rise, and housing market activity is gradually improving thanks to lower mortgage rates. The U.S. economy remains resilient, with steady growth expected in the near future.