With economic data, we actually look backwards to form a vision of what lies ahead. In May, Existing Home Sales grew 1.8% to a solid 5.53 million unit annual rate, their highest sales pace in more than nine years. Many see demand building in the future, based on that strength last month. Homes typically were on the market only 32 days, the shortest duration since the National Association of Realtors started tracking that data back in 2011. Even better, 49% of existing homes sold in less than a month.
This level of demand helped send the median price 4.7% higher than a year ago, the 51st month in a row of annual price gains.
Price gains should help boost existing home supply, as sellers who were on the fence put their homes on the market to take advantage of higher prices, and then trade up. New home sales took a rest last month following their April surge, off 6.0%, logging a 551,000 unit annual rate. But that's a very decent 8.7% ahead of where they were a year ago. This level was also the second strongest read since February 2008 -- so to say the trend is positive is an understatement. The median new home sales price fell for the month, but is still 1.0% higher than a year ago. The sales drop also reflected a good development -- the mix of homes sold tilted toward the lower end of the market.
Review of Last Week
Thursday, the British people voted to leave the European Union and go their own way without having to listen to 40,000 unelected Brussels bureaucrats. This divides the island nation from its continental counterparts. It's the type of disruptive move that's celebrated in technology but spurned on Wall Street because investors do not like changes that come with uncertainties. So after stocks frolicked higher for four days, the market sank on Friday to finish down, not just for the week, but for the year. Whether the 'Brexit' will have any long-term negative effect on U.K. or global economies remains to be seen and many clear-headed observers believe it will not.
But experts say it may take a few years for what was just voted to be fully realized, and that's where uncertainties come in. 'Uncertainties' was the word Fed Chair Janet Yellen used incessantly in her post-meeting presser the week before, where she alluded to the Brexit vote and hinted she's in no hurry to raise rates. Today, Fed watchers don't see a rate hike through next February. This makes Brexit good news for mortgage rates, which is great news for the housing market. Other news wasn't so good. May Durable Goods Orders fell 2.2%, showing manufacturing's continued struggles, no surprise there. June Michigan Consumer Sentiment slipped to 93.5 from May's 94.7.
The week ended with the Dow down 1.6%, to 17401; the S&P 500 down 1.6%, to 2037; and the Nasdaq down 1.9%, to 4708.
After investors heard the Brexit vote overnight, Friday morning saw them high-tailing it to the safe haven of bonds. Treasuries soared and mortgage bonds did OK too. The 30YR FNMA 4.0% bond we watch finished the week UP .08, at $107.11. For the week ending June 23, Freddie Mac's Primary Mortgage Market Survey reported national average 30-year fixed mortgage rates largely unchanged, near three-year lows. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.
Did you know?
The U.S. Census reports that in 2015, 53% of new single-family homes sold had four-plus bedrooms and 41% had three or more bathrooms. This is an over 30-year high, believed to be fueled by the rise in multi generational housing.
This Week’s Forecast
Pending home sales dip, consumers spend, inflation, manufacturing hold. For May, analysts are predicting Pending Home Sales will recede after their April surge. Personal Spending should be up, though not as much as in April. But it's good to see consumers opening their wallets and Core PCE inflation still mild. Not so good to see manufacturing in a holding pattern, with the Midwestern Chicago PMI and the national ISM Index hovering near the no-growth 50 level.
The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
Economic Calendar for the Week of Jun 27 – Jul 1
Tu Jun 28 08:30 GDP - 3rd Estimate
Tu Jun 28 10:00 Consumer Confidence
W Jun 29 08:30 Personal Income
W Jun 29 08:30 Personal Spending
W Jun 29 08:30 Core PCE Price Index
W Jun 29 10:00 Pending Home Sales
W Jun 29 10:30 Crude Inventories
Th Jun 30 08:30 Initial Unemployment Claims
Th Jun 30 08:30 Continuing Unemployment Claims
Th Jun 30 09:45 Chicago PMI
F Jul 1 10:00 ISM Index
Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months... After the Brexit vote, most economists think the Fed won't touch the current Funds Rate clear into next year. There is even a 7% probability the Fed will actually lower the rate in July, September or November, with that last month also registering a 2% probability the rate will go up. Note: In the lower chart, a 7% probability of change is a 93% certainty the rate will stay the same.
Current Fed Funds Rate: 0.25%-0.5%
After FOMC meeting on:
Jul 27 0.25%-0.50%
Sep 21 0.25%-0.50%
Nov 2 0.25%-0.50%
Probability of change from current policy:
After FOMC meeting on:
Jul 27 7%
Sep 21 7%
Nov 2 9%
Have a great week and please contact me direct if you have any questions I can answer!
Scott Synovic is a top performing mortgage loan originator providing superior levels of service and satisfaction to clients and business partners in Colorado - www.scottsynovic.com NMLS #253799 Fairway Independent Mortgage Corporation #2289