Inflation Eases: Encouraging Signs for Buyers and Sellers

This week’s inflation data came in lower than expected, signaling progress in the Federal Reserve’s effort to cool price growth. Yet despite the softer readings, mortgage markets showed little reaction, and rates ended the week nearly unchanged.

Core Inflation Slows to Lowest Level Since 2021

The Consumer Price Index, one of the most important monthly inflation indicators, offered promising news in February. Core Consumer Price Index—which excludes food and energy for a clearer view of underlying trends—rose 3.1 percent from a year ago. This was below forecasts and marked the lowest annual rate since April 2021. For real estate, easing inflation typically supports a more stable mortgage environment, which can boost buyer confidence. Although rates held steady this week, continued progress on inflation may increase the likelihood of lower borrowing costs in the months ahead. Sellers may benefit from increased demand as more buyers reenter the market.

Housing Costs Remain a Stubborn Factor

Despite broader improvement in inflation, housing costs continue to rise and remain one of the biggest contributors to elevated price levels. Shelter costs were a primary factor keeping overall inflation from falling further. At the same time, prices for used cars, apparel, and auto insurance increased significantly, while airline fares dropped sharply. For buyers, rising shelter costs may reinforce the appeal of homeownership as a hedge against future rent increases. For sellers, persistent housing demand driven by these inflationary pressures may help support home values, but affordability concerns tied to mortgage rates remain a key consideration.

Producer Prices Also Point to Cooling Inflation

The February core Producer Price Index, which tracks wholesale prices, fell 0.1 percent from January—far below the expected 0.3 percent increase. On a yearly basis, core Producer Price Index rose 3.4 percent, a slight decrease from the 3.6 percent rate in the prior month. For real estate, cooling producer prices suggest that construction costs may stabilize, which is encouraging for both new home buyers and sellers looking to make cost-effective home improvements before listing. Slower growth in supplier pricing could also help homebuilders manage costs and expand inventory.

Lower Rates Drive Surge in Mortgage Applications

According to the latest report from the Mortgage Bankers Association, mortgage activity rose sharply in response to lower rates seen in recent weeks. Refinance applications jumped 16 percent from the prior week and were up 90 percent from a year ago. Purchase applications rose 7 percent week over week and were slightly higher than this time last year. For buyers, the uptick in mortgage applications reflects growing momentum and renewed interest in the housing market. Sellers may find that more motivated buyers are returning, increasing the likelihood of stronger activity heading into the spring season.

What This Means for Real Estate

This week’s inflation reports provide encouraging signals for mortgage markets and home affordability. For buyers, stable or improving rates paired with easing inflation create a promising window to make a move. For sellers, stronger application numbers and steady demand suggest the potential for increased interest, but thoughtful pricing and preparation remain important.

Understanding how economic data shapes the real estate landscape can help you make confident, well-timed decisions. Whether you are buying or selling, staying informed gives you the edge in today’s evolving market.