Last week’s economic reporting included readings on new and pending home sales, minutes from the Federal Reserve’s recent Federal Open Market Committee meeting, and data on inflation. Weekly readings on mortgage rates and jobless claims were also released. Mortgage rates are going up, as are monthly mortgage payments, but home sales are slowing in response, which could have an effect on the economy.
New and Pending Home Sales Pace Slides
According to the Commerce Department, the annual pace of new home sales fell fairly sharply in April; the year-over-year sales of new homes fell to a pace of 591,000 sales as compared to the March reading of 709,000 sales of new homes.
This is in contrast to what analysts expected, which was a year-over-year pace of 750,000 new home sales in April. First-time and moderate-income home buyers were challenged by rising home prices and mortgage rates, contributing to the falling sales.
Readings for pending home sales fell by -3.90 percent in April, another bigger than expected slump, as analysts expected a reading of -2.00 percent based on the March reading of -1.60 percent.
Prospective buyers’ interests have cooled as high home prices and recently rising mortgage rates as well as concerns over rising inflation and economic conditions contribute to sidelining of low and moderate-income home buyers.
The chief economist for the National Association of Realtors®, Lawrence Yun, has announced that rising mortgage rates have increased monthly mortgage payments by as much as $500. Fewer home sales also has a secondary effect on the economy by reducing the sales of goods and services associated with home ownership.
The Federal Reserve’s Federal Open Market Committee minutes documented the Fed’s decision to raise its key interest rate range to 0.75 to 1.00 percent. FOMC members expect ongoing rate range increases and corresponding effects on home sales as the Fed continues its efforts to control inflation.
Lower Average Mortgage Rates
Freddie Mac has now reported lower average mortgage rates for the second consecutive week. Rates for 30-year fixed rate mortgages have now fallen by 15 basis points to 5.10 percent and rates for 15-year fixed rate mortgages have fallen by 12 basis points to 4.31 percent. However, the average rate for 5/1 adjustable rate mortgages rose by 12 basis points to 4.20 percent.
Discount points averaged 0.90 percent for 30-year fixed-rate mortgages and 0.80 percent for 15-year fixed-rate mortgages. Discount points for 5/1 adjustable rate mortgage rates averaged a mere 0.30 percent.
New Jobless Claims Drop
New jobless claims fell sharply to 210,000 claims filed from the prior week’s reading of 218,000 initial claims filed. Analysts expected only a 3,000 drop to end at 215,000 new jobless claims. Continuing jobless claims rose to 1.35 million ongoing claims filed as compared to 1.32 million ongoing claims filed week over week.
The University of Michigan’s Consumer Sentiment Index also fell, arriving at an index reading of 58.40 in May as compared to April’s reading of 59.10. Readings over 50 are considered positive.
What’s Ahead for the Week of June 6, 2022
Next week’s scheduled economic reports include readings on home prices and construction spending along with labor sector readings on job growth and the national unemployment rate.
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