 Core Inflation -- 12 months Bonds and home loan rates improved slightly in the early part of last week as weak economic reports caused money to flow from stocks into bonds. Even though bonds lost some ground on Friday, home loan rates ended the week slightly improved from where they began.
Core inflation has been moving slightly higher since February, as you can see in the chart. Still inflation is way down from the high for recent years set in August 2008. Remember that inflation is the enemy of bond investment and when inflation rises, the bond market will drive interest rates higher.
What’s core inflation, by the way? It’s a consumer price index without the food and energy component – so, it’s everything else we buy. The increase last month was due to a huge spike in tobacco prices. Since hardly anyone smokes anymore, one wonders why that would have such an impact, but the increase for tobacco was 9.3%. That’s another reason to stop smoking if you already did not have enough. The overall consumer price index, with food and energy included, was flat, which is good since most people can only buy food and energy now. Wholesale inflation levels moved higher in April, however, driven by an increase in food prices so that may translate to higher consumer prices for food in May.
This coming week will bring a number of economic reports, including the manufacturing and housing reports for April. Remember that good economic news tends to be bad news for home loan rates. So while you celebrate the improvement of the economy (whether this week or next month or the month after) remember that will mean the end of the historically low home loan rates we’ve enjoyed.
Don’t miss the bottom of either home loan rates or Flagstaff home prices, visit a Flagstaff mortgage lender this week and then give us a call to buy your Flagstaff home: Team Heitland at RE/MAX Peak Properties. | 
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