If the Fed continues on its goal of getting the inflation rate closer to 2.00%, reaching that target appears to still be further and further away. You saw last week the Labor Department reported the Producer Price Index, or PPI, fell by 0.4%*, a difference of 0.6% from economists’ expectations.  In March,Mortgage rates will follow path of Fed Funds rate...remaining low PPI registered a 0.2% gain yet that followed drops of -0.8% and -0.5% for January and February respectively.

The PPI is the amount of goods produced at the wholesale level. The Fed’s target applies to retail inflation, what consumers pay for goods and services. Yet PPI is the precursor of the Consumer Price Index, or CPI. CPI data for April will be released this Friday.

For real estate investors, that means financing costs will be low most likely well into next year. That’s our opinion but there really is nothing on the horizon that could indicate the economy is in danger of overheating. Wall Street is still somewhat fearful of a rate increase and as long as the economy continues to trudge along the prospects of the Fed raising rates sooner rather than later are remote. The Fed has kept the Fed Funds rate effectively near 0.00% since late 2008.

Low rates also mean more people can qualify for financing which supports the real estate markets and beyond. The first time home buyer needs to buy a first home and most often it’s from someone that is buying yet another property. Without the first timer, the second timer will have a smaller pool of potential buyers. Inflation is simply not there and as long as that’s the case, rates should stay within their current range.

*Bureau of Labor Statistics May 14, 2015