Consumer price inflation is the highest in over 40-years and showed no sign of slowing down in June. It rose by 9.1% and is accelerating. The annualized inflation rate (one month change multiplied by 12 months) was an eye-popping 17%. The Fed may be forced to raise interest rates even more aggressively than planned, even with a rising possibility of a recession on the horizon. The mortgage market had already factored in several additional rounds of the Fed’s rate hike, but may have to adjust a bit higher based on today’s uncomfortable inflation rate.
Home prices, which have been rising by 15%, are not included in the inflation figure. The 50% rise in monthly mortgage payment for buyers this year versus last year is also not included in the consumer price index. However, the homeowners who had locked in low interest rates of the prior two years have fixed non-rising monthly mortgage payments. A different story for renters. Rents rose by 6% from last year and rising at 10% annualized rate. Rents will continue to rise in the upcoming years.