Happy Tuesday. Brian Manning here. I know we're doing a mid-week update but I have to do an update today because we got our inflation numbers for the month of November. We've been talking about this. Last month, we got a great inflationary reading. We really expected a really positive one today.

So, we got CPI today. It's Consumer Price Index. This is our inflationary reading for the month of November. We expected inflation to come down. We've talked about this in the past. If you watched any of our updates, you know that we've talked about inflation being the arch enemy of interest rates. And we've been looking forward to these readings because we've been predicting for quite a while that inflation was going to start coming down in the month of November and carry it on to where we are right now and really pushing us into the next year, causing mortgage rates to come down.

We've talked about this in the past. We truly believe that mortgage rates are going to be in that 5% range, Q1, Q2 of this upcoming year. If you're a home buyer, you should be listening to this. There are 4 million buyers on the sidelines right now waiting to buy a home because they think rates are too high. As mortgage rates come down and the media gets ahold of this and you get more and more buyers jumping into the marketplace, it's going to get crazy.

Now, I don't think it's going to be like last year. I don't think you're going to see homes selling for $200,000 above list price. But... when you start getting buyers jumping back into the pool, spring, summer of this upcoming year is going to be a pretty active market. So, you want to pay attention to that. I just want to look at some numbers today for CPI to share with you what we're looking at and how great this report was. Bear with me for one second, please.

Let's see... Okay. So, the first thing I want to look at is CPI. This is Consumer Price Index. This measures inflation for us as consumers. For the month of November, the headline number was only up 0.1%. On a year-over-year basis, this went from 7.7% down to 7.1%. The core number, this is what the Federal Reserve primary looks at, was only up 2/10th of a percent. But this brought the core number for inflation down from 6.3% to 6%.

What's important to know is that if these numbers were annualized, this would really put us in like the 2 to 2.5% range for inflation, which is the Federal Reserve's goal. So, really good to see these inflationary numbers come down here. Something really important to look at, though, is just what contributes into inflation. So, shelter for us makes up about 39% to 40% of the inflationary numbers. So, shelter right now was still up 7/10th of a percent.

So, it's still a really strong number. When I say strong, I mean that's high. Rents are still high. And then, this is something really impactful to look at. We talked about this in the last report. So, this is lodging away from home. So, lodging away from home and the last inflationary report was up like 4.9%. We're starting to see travel come down and lodging away from home went from being up 4.9% to being down 0.7%. So, this was a positive impact for us. And this definitely helped the inflationary numbers come down.

What I also want to look at is just a chart here. What looked at this in the past of why inflation is coming down and what's going to happen to it in the near future. So, we've talked about this. We knew this year and this summer we were going to get really high inflationary pressure. Sure enough, we were correct. In October of this year, we hit the apex of interest rates. But we also knew coming into the fall when we started replacing last year's inflationary numbers with this year's inflationary numbers, we knew we were going to see inflation come down, right?

So... Last month, we had inflation come down. This month, we had it come down again. You know, if we look going forward, December, January, February, into next year, April, May, June, August, September, you know, all these months, we're going to be replacing very high inflationary numbers and we're going to continue to see inflation come down, which is really important for interest rates. One I'm going to pay attention to though, is that shelter is a very important and very large percentage of the inflationary numbers and shelter is a lagging number.

So, what I mean by that is when they add shelter into the CPI report, this is really numbers from like six months ago. So, you know, we might see real shelter costs coming down right now, right? Home prices are stabilizing, rents are coming down. So, cost of shelter is stabilizing, which is really good to see. The problem is shelter and the CPI is lagging because it's data from like six months ago. So, we're really not going to see, as far as the CPI reading of shelter is concerned, we're not going to see that peak until January.

So, January is probably going to be that apex in the shelter cost and then from after January's report going forward is likely when we're really, really, really going to see inflation come down yet even more. That's why we really predict when you're going into Q1, Q2 of this upcoming year, you're going to see mortgage rates hit that 5% range. Because once we get over that apex of shelter costs, again, it's like a six-month lagging index, and then we have reduced shelter costs and then you have reduced costs coming in everywhere else, the CPI number is just going to keep going lower and lower and lower.

And again, inflation is the arch enemy of interest rates. So, if inflation comes in check and it continually reduces, mortgage rates are going to keep coming down. There's a lot of negativity in the news about interest rates, a lot of negativity about housing. I'm telling you, you're going to see rates hit that 5% range. Housing is going to be just fine. We're all going to be in a really good spot. If I was a home buyer, I would be buying a house right now when I could. I'd be negotiating the best price possible, and I'd be planning to refinance my loan here in the near future because there's definitely going to be opportunity to do so. I'm around. If you have any questions, let me know. Super excited to give you this report today because this is really unfolding exactly as we're predicting. Hope you have a great day. Talk to you soon.

-Brian

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