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The housing market remained stable this week, although affordability remains a problem; mortgage applications decreased; existing home sales slipped 5.4 percent; housing inventory continues to grow, although nearly two-thirds of homes on the market had been listed for at least 30 days without going under contract; 56,000 home purchases were canceled last month and home price growth is slowing but expected to moderate.

Weekly Housing Trends View — Data for Week Ending July 20, 2024
Realtor.com - 7/25/2024
The housing market has been stable in recent weeks, with pricing flat, listings increasing and longer time on market. However, affordability continues to pose challenges to home buyers, leading existing-home sales to slip in June.

Mortgage Applications Decrease in Latest MBA Weekly Survey
Mortgage Bankers Association - 7/24/2024
Mortgage applications decreased 2.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Applications Survey for the week ending July 19, 2024.

Existing-Home Sales Slipped 5.4% in June; Median Sales Price Jumps to Record High of $426,900
National Association of Realtors - 7/23/2024
Existing-home sales fell in June as the median sales price climbed to the highest price ever recorded for the second consecutive month, according to the National Association of Realtors.

New home sales dip in June; Buyers wait for lower rates
Realtor.com - 7/24/2024
New home sales dipped 0.6% lower in June, dropping from May’s upwardly revised rate to 617,000 annual new home sales.

Report: Houses Gathering Dust On Market As Unsold Inventory Grows
MortgagePoint - 7/24/2024
Nearly two-thirds (64.7%) of homes on the market in June had been listed for at least 30 days without going under contract, according to a new report from Redfin.

Mortgage Application Payments Decreased 2.4 Percent to $2,167 in June
Mortgage Bankers Association - 7/25/2024
Homebuyer affordability conditions improved for the second straight month as declining mortgage rates continue to increase purchasing power and is enticing some borrowers back into the housing market.

Home Price Growth Expected To Moderate
National Mortgage Professional - 7/23/2024
Fannie Mae and Redfin both forecast home price growth slowing in latest reports.

Home Deals Fell Apart At A Record Rate For June, Redfin Says
Financial Advisor - 7/23/2024
Nearly 56,000 home purchases were canceled last month, equal to about 15% of all homes that went under contract that month, Redfin Corp. reported Tuesday.

The worst may be over for homebuyers
CNN Business - 7/23/2024
Americans have been feeling overwhelmingly dejected about their prospects of buying a home. But there are now signs that maybe, just maybe, the worst could be over for homebuyers.

Some renters may be ‘mortgage-ready’ and not know it. Here’s how to tell
CNBC - 7/18/2024
Millions of renter households in 2022 would have been able to buy a house that year, according to a new analysis by Zillow.

This week saw an increase in mortgage applications; national house price growth slowed for the sixth consecutive month; foreclosure filings decreased in Q1; home prices show signs of slowing down; the market remains in a holding pattern and builder confidence has fallen slightly.

June New Home Purchase Mortgage Applications Increased 0.7 Percent
Mortgage Bankers Association - 7/18/2024
Applications for new home purchases slowed in June, consistent with broader declines in single-family construction and new building permits as well as typical seasonal patterns.

National House Price Growth Slows For Sixth Consecutive Month
National Mortgage Professional - 7/16/2024
House prices nationally are now 54.7% higher compared to pre-pandemic levels, according to the June 2024 Home Price Index report from First American Data & Analytics.

Mortgage Applications Increase in Latest MBA Weekly Survey
Mortgage Bankers Association - 7/17/2024
Mortgage applications increased 3.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Applications Survey for the week ending July 12, 2024.

Weekly Housing Trends View — Data for Week Ending July 13, 2024
Realtor.com - 7/18/2024
This week’s data revealed a housing market in a holding pattern with no price growth, a slower market and more price reductions.

ATTOM: Foreclosure Filings Decreased in the First Half
MortgageOrb - 7/12/2024
A total of 177,431 U.S. properties saw foreclosure filings — default notices, scheduled auctions or bank repossessions — in the first six months of 2024, according to ATTOM.

Fannie Mae: Home Prices Show Signs Of Slowing
National Mortgage Professional - 7/18/2024
Single-family home prices saw a year-over-year increase of 6.9% in Q2 2024, per Fannie's latest Home Price Index.

Single-Family Starts Weaken in June
Eye On Housing - 7/17/2024
Overall housing starts increased 3.0% in June to a seasonally adjusted annual rate of 1.35 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

U.S. Home Appraisals Were Higher Than Sale Prices 51 Percent of the Time in First Half
MortgageOrb - 7/16/2024
The gap between appraisals and sale prices is the highest that it has been since the start of the pandemic in 2020, according to a report from Corporate Settlement Solutions.

The housing market, explained in 6 charts
CNBC - 7/13/2024
The housing market looks far different than it did when the pandemic was just starting. These charts help explain why.

Builder Confidence Falls Slightly in July
National Mortgage Professional - 7/17/2024
Builder confidence in the market for newly built single-family homes was 42 in July, down one point from June, according to the National Association of Home Builders/Wells Fargo Housing Market Index.

This week saw a decrease in mortgage applications; homebuyer sentiment is on the rise; homeownership became less affordable in Q2; the number of homes actively for sale was notably higher compared with last year; and housing inflation remains stubbornly high.

Mortgage Applications Decrease in Latest MBA Weekly Survey
Mortgage Bankers Association - 7/10/2024
Mortgage applications decreased 0.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Applications Survey for the week ending July 5, 2024.

Weekly Housing Trends View — Data for Week Ending July 6, 2024
Realtor.com - 7/11/2024
This week’s data revealed a sluggish housing market, with both sellers and buyers easing off due to Independence Day. Fewer sellers listed new homes, and properties stayed on the market longer.

Report: Homebuyer Sentiment On The Rise
MortgagePoint - 7/8/2024
Fannie Mae’s latest Home Purchase Sentiment Index rose 3.2 points in June to 72.6, rebounding from last month’s dip and returning the Index nearer the plateau it set earlier this year.

ATTOM: Homeownership Became Less Affordable in Q2
MortgageOrb - 7/8/2024
Major homeownership expenses – including mortgage payments, property taxes and insurance – now consume about 35% of the average wage nationwide, according to ATTOM’s U.S. Home Affordability Report.

Mortgage Credit Availability Increased in June
Mortgage Bankers Association - 7/11/2024
Mortgage credit availability increased in June for the sixth consecutive month, as lenders expanded their offerings of cash-out refinance loan programs.

June 2024 Monthly Housing Market Trends Report
Realtor.com - 7/9/2024
The number of homes actively for sale was notably higher compared with last year, growing by 36.7%, an eighth straight month of growth.

Here’s why housing inflation is still stubbornly high
CNBC - 7/11/2024
Housing accounts for 36% of the CPI index, since it’s the biggest expense for the average household. Movements in shelter prices therefore have an outsized influence on inflation readings.

Rising Home Values Are Driving Property Taxes Higher — These States Are Trying to Do Something About It
Realtor.com - 7/8/2024
Several states are pursuing measures to limit the pain for homeowners by limiting annual increases to property tax revenue collections or assessment values.

Gen Z homebuyers defy 20% down payment norm
Mortgage Professional America - 7/11/2024
Homeownership is becoming increasingly expensive, but younger generations entering the housing market are finding new strategies to cope with low down payment options, a new TD Bank survey has revealed.

It suddenly looks like there are too many homes for sale. Here’s why that’s not quite right
CNBC - 7/9/2024
There is currently a 4.4-month supply of both new and existing homes for sale, according to the National Association of Home Builders, or NAHB.

This past week interest rates moved lower, approaching levels last seen in March. Let's discuss why and look into the week ahead.

One or Two?

At the recent Fed meeting, the big surprise was Fed Chair Powell suggesting there would no longer be a rate cut in 2024, two less than previous forecasts just three months ago. Why? The Fed sees inflation running hotter than expected, and for this reason, they only see one rate cut this year.

However, despite the Federal Reserve being correct about the "higher for longer" path of interest rates over the last couple of years, the financial markets and many on Wall Street see the Fed cutting twice. One could be as soon as September, followed by another in November.

Why the Disconnect?

The economy is decelerating, and there are more signs that the consumer is slowing its spending. Consumer spending makes up two-thirds of our economic growth. So, if the consumer retreats, our economy can't grow. And if our economy is not growing, unemployment rises, and a recession follows. A scenario where the consumer retreats and unemployment rises faster than expected would be a worst-case scenario for the Fed. They are trying to engineer a "soft landing", where they keep rates higher for longer and slowly lower rates with little disruption to economic activity.

The Canary in the Coal Mine

If consumer spending is critical to economic growth, then Retail Sales is an important figure to watch. This past week the headline number for Retail Sales was very disappointing. It also included downward revisions to previous figures. But the most concerning part is when you adjust Retail Sales for inflation. In doing so we learn that real Retail Sales have turned negative. Meaning we are not buying more goods; we are simply paying more. History has shown that when real Retail Sales flat line and turn negative it ultimately leads to a recession.

Housing Starts and Permits Fall Sharply

In May both Housing Starts and Permits came in well below expectations. The soft reading highlights the impact of elevated rates and affordability restraining building activity. Upon anticipated rate relief from a slowing economy and Fed rates cut, this story can and likely will change quickly.

Look Around

With all the noise and revisions from economic reports, sometimes it's good to just look around and see what is happening and get a sense of the economy. For instance, in recent weeks McDonald's, Starbucks and other corporations have installed "value meals" or reduced-price offerings to attract consumers. In the case of Starbucks, they recently reported a decline in foot traffic. The Fed wants to see this as it helps lower inflation, but they also do not want to see too much of it as it could lead to a recession down the road.

Unexpected Weakness

The Fed said rates are higher for longer unless they see "unexpected weakness" in the labor market. As we continue through the Summer, we need to track the labor market readings closely. If they show "unexpected weakness", that will likely be the deciding factor for the Fed to cut rates sooner and maybe more than they recently suggested. At the moment, Initial Claims, which is a leading indicator of the health of the labor market, is showing a large weekly increase in people filing for first-time unemployment benefits. Also, within the latest jobs report, we are seeing hires and quits near pre-pandemic levels as they continue to decline.

Bottom line: The recent weakness shown in the labor market and economic reports are somewhat welcome by the Fed, as they feel this will continue to push inflation lower. Moving forward it would not be a surprise to see continued.

This past week the Federal Reserve decided not to cut rates and shared their updated forecast on the economy. Let's discuss what was said and what's ahead for the upcoming week.

Higher for Longer Continues

The Federal Reserve met last Wednesday and once again decided to make no change to interest rates. The markets widely expected this, but what caught many off guard was the Fed's updated summary of economic projections.

This is where the Fed gives its quarterly update on where it sees unemployment, economic growth (Gross Domestic Product), inflation, and where interest rates are headed for the next couple of years. There were a couple of big surprises. First, the Fed believes inflation may not come down any further for the rest of the year. And because of this, the Fed lowered its forecast of interest rate cuts from three this year to just one.

At the same time, they maintained their forecast for economic growth and the unemployment rate which are expected to come in at 2.1% and 4%, respectively, at year's end.

Hawkish Press Conference

Thirty minutes after the Fed statement was released, Fed Chair Powell held a press conference, and here he amplified the position of keeping rates higher longer until inflation moves sustainably towards their goal of 2%.

Despite acknowledging that the jobs report likely overstated the strength of the labor market, the sector market remains tight with unemployment at historically low levels. Mr. Powell also shared he sees no recession on the horizon.

CPI and PPI Come in Low

The Fed calling for inflation to potentially rise from current levels took some of the shine from the low Consumer Price and Producer Price Index for May readings midweek. Inflation readings with or without energy could likely be a one-off in May, as oil prices are already up 10% in June near $80 a barrel.

Bottom line: The near-term outlook for rates is uncertain now that the Fed said it's still higher for longer. Longer-term rates should continue to gradually move lower as the economy continues to cool and unemployment rises.

Interest rates dropped to the lowest levels in the last two months. Let's discuss why and what's next.

Economic Deceleration

In the past couple of weeks, there have been many economic readings revealing that the economy is slowing. Our gross domestic product (GDP) for the first quarter was revised lower to 1.3%. Coming on the heels of 4.9% and 3.5% for both the third and fourth quarters of 2023, this highlights an economic slowdown. There was also growing sentiment that the second quarter would rebound sharply from the 1.3% reading. However, the Atlanta Fed poured cold water on that idea. They significantly lowered their forecast for the second quarter from over 4% to 1.8%. This downward revision caught the financial markets by surprise, and interest rates declined sharply in response.

Manufacturing Not Manufacturing

Another sour reading on the economy was the Institute of Supply Management (ISM) Manufacturing Index. This report indicates a contraction or absence of manufacturing. This means that people are losing jobs in this sector, which is never a good thing. Bonds like bad news, and this bad news helped bonds last week.

Help Wanted Signs Disappear

The JOLTS report showed that help-wanted signs continue to disappear, meaning there are fewer jobs available and highlighting the loosening in our labor market. Currently, there are just over 8 million jobs available, the lowest reading in three years and well off the high of 11 million seen a few years ago.

This is an important figure to watch because if there are fewer jobs available, people are less likely to quit and are not in any position to demand higher wages, which feeds inflation. This is another case where bad news helps bonds because it fuels the idea that a Fed rate cut could come sooner rather than later.

Unexpected Weakness

Interest rates still have the overhang of debt and inflation pressures, which hurt rates. However, Fed Chair Powell said at the previous Fed meeting that they will not have an appetite to cut rates unless they see "unexpected weakness" in the labor market. We may very well be seeing that unexpected weakness happening now. A Fed cut may be on the near-term horizon if labor market prints continue to show weakening signals.

4.29%

The 10-year Note, which ebbs and flows with mortgage rates, declined to 4.29% last week, the lowest level since early April. Moreover, the yield pushed beneath its important 200-day Moving Average. If the 10-year Note can get comfortable under its 200-day Moving Average, it could lead to stable to lower rates ahead.

Oil is Lower

Another metric to watch in determining where rates are headed is the price of oil. Oil prices have declined sharply in the last couple of weeks, in tandem with interest rates. This is on the perceived notion of an economic slowdown here and abroad.

Bottom line: The winds have changed in bonds' favor over the past two weeks as a slew of bad economic news has hit the market. It also appears that "bad news is finally bad news," meaning that it supports lower rates.

This past week interest rates moved sharply higher in response to a host of unfriendly bond news. Let's discuss what happened and what to watch for in the weeks ahead.

We Need More Revenue

This past week was shortened due to the Memorial Day holiday, but it was filled with tall problems which caused rates to spike. It all started on the Friday before Memorial Day when Treasury Secretary Janet Yellen told the world that the path for rates is higher, and we need more revenue.

This was an important statement as it highlights our deficit spending and our need to sell more treasury debt to fund our government.

The debt sales were tested this past week and ended up being a main driver for the spike higher in interest rates. The Treasury sold $183B worth of 2,5 and 7-yr Notes and the auction results were poor where buyers demanded higher interest rates to purchase all the debt. As Treasury yields move higher, mortgage-backed security prices drop, thereby elevating home loan rates.

Higher For Longer

Since the Fed Meeting back on May 1st, where the Fed Chair Powell said they are not hiking or cutting rates, many officials have since been pouring cold water on the idea that a rate cut is coming soon.

This past week, we heard comments like "Don't count out a rate hike" as the next move and "higher indefinitely" was uttered by another Fed official. This means those betting on a rate cut soon might want to reassess their position as the chance for the first cut has now been pushed back to November. And as we have seen over the last year or so, if inflation remains stubbornly high, we may not see a cut at all in 2024.

Higher Oil

Yet another problem for interest rates and the overall economy is energy prices. Oil hit $80 a barrel last week. This is significant as oil and 30-year mortgage rates tend to ebb and flow together. When oil prices edge higher so do mortgage rates. Why?

High oil prices are inflationary. If inflation readings remain near current levels or even edge higher, there is no way the Fed can cut interest rates which means higher for longer.

Consumer Sentiment Moves Higher

Bonds hate inflation, bonds hate more bonds and bonds hate good news. Despite the uncertainty about higher interest rates and elevated oil prices, the consumer sentiment reading last week was an upside surprise as people felt a bit more optimistic - breaking a trend of recent pessimism.

Bottom line: We should take the Fed at its word that rates will be higher for longer. Deficit spending and high energy prices will help fuel this notion. 

This past week interest rates inched up as "higher for longer" signs around the globe emerged. Before we get into the news, let's take a moment to reflect on this Memorial Day holiday and its significance.

Originally called Decoration Day, Memorial Day was first observed after the Civil War and is in remembrance of those men and women who have died in military service for our country. Memorial Day was declared a Federal Holiday in 1971 and commemorated on the last Monday in May. Memorial Day weekend is often the unofficial kick-off of summer.

The Fed is Higher for Longer

On Wednesday, the Minutes from the previous Fed Meeting three weeks ago highlighted that most Fed officials do not see the need to cut rates anytime soon.

You may recall at that Fed Meeting, Fed Chair Powell was clear they were not going to hike rates and they were not going to cut either. After sharing the Minutes with the world, we now know the Fed is waiting for inflation to move "sustainably towards 2%" before cutting rates unless the labor market shows weakness.

As of this moment, the chance of a Fed hike has been pushed to November.

The UK is Higher for Longer

Earlier last week, the United Kingdom reported inflation higher than expectations, and this immediately pushed the chance of a rate cut in the region from June until further into the year. As a result, interest rates around the globe spiked higher, including here in the U.S.

Nvidia is Also Higher for Longer

On Wednesday after the bell, chip maker Nvidia reported blockbuster earnings, well beyond expectations. Also helping stocks move higher for longer was Nvidia‘s sales outlook for the future, which highlights that AI or artificial intelligence is moving very fast, and Nvidia is at its forefront.

Dimon Says Brace for "Hard Landing"

JP Morgan Chase CEO, Jamie Dimon was speaking in Shanghai where he said there is a chance the U.S. could endure a "Hard Economic Landing" which could also include stagflationary conditions – slower growth and higher prices.

Bottom line: Higher for longer it is, until it isn't. What will change the Fed's position is a change in the labor market or signs inflation is moderating.

This past week interest rates have reached the lowest levels in over a month. Let's discuss what happened and what news to watch next week.

Ahhhh

Last Wednesday, the highly anticipated Consumer Price Index was released. Back on April 10th, the previous CPI reading was reported hotter than expected and pushed interest rates to the highest levels of the year. As a result, the market was on edge heading into this report.

The good news? The report met expectations, as the headline inflation figure came in at 3.4% year-over-year. With the markets fearful of an even hotter number, the in-line reading gave the financial markets a sigh of relief. Why? If inflation were to re-accelerate, it would further push out a Fed rate cut.

We are not out of the woods yet as it relates to inflation, but this report did offer comfort that the next move from the Fed will indeed be a rate cut at some point. After this reading the chances of a Fed rate cut in September grew larger.

Consumer Slowing Down

Consumer spending makes up nearly two-thirds of our economy. This is important to know when following reports on the health of the consumer as it relates to inflation, Federal Reserve policy, and interest rates.

Retail sales for April were reported and the reading was poor. Essentially, the consumer spent money on gas and groceries and little else. Moreover, when adjusting retail sales for inflation, the readings were negative, meaning the consumer is not buying more goods, but simply paying more.

Weak economic readings like this are bond-friendly and a big reason why rates improved last week.

Seeing real Retail Sales, or inflation adjusted Retail Sales turn lower has been a precursor to a recession in the past, so this is a report worth following moving forward.

Global Yields Lower

Also helping our interest rates are Central Banks around the globe telling the world that they will be cutting rates. It now appears the European Central Bank and Swiss National Bank are going to cut rates before the United States. This news prompted a decline in rates around the world and when that happens it puts pressure to push rates lower here in the U.S.

Bottom line: The case for a Fed rate cut sooner has grown, however further rate improvement may only come upon more reports showing inflation is indeed moving lower.

This past week, interest rates held steady or moved sideways after the nice decline we experienced a couple of weeks ago. Let's discuss what happened and look at the news items in the week ahead.

Fed Speakers Toeing the Line

"Eventually we'll have rate cuts, but for now monetary policy is in a very good place," New York President, John Wiliams.

A couple of weeks ago Fed Chair Jerome Powell told the world that there will not be a rate hike nor will there be a cut. This past week, several Fed officials (including Williams quote above) reiterated the notion that a Fed rate cut is not imminent and that they will keep rates higher for longer if needed.

The Fed Funds Futures, which prices in the probability of Fed rate hikes and cuts, is now pricing in a rate cut for September. Just two weeks ago, the chance of an initial rate cut was in November. This highlights how fast markets can change.

Debt Remains a Headwind

Last week, our Treasury Department needed to sell bonds to fund our government. The longer-dated bond auctions like the 10-year Note carry added significance because long-term bonds are subject to inflation risk and opportunity cost.

On Wednesday, the Treasury Department sold a record number of 10-year Notes and the buying appetite was not that great. This means there were not a lot of bids to purchase the bonds at current rates, so rates did not improve. However, it could be viewed as a victory. Remember...the previous 10-yr auction on April 10th was very bad and pushed the 10-year Note yield sharply higher and mortgage-backed securities prices sharply lower.

As the U.S. continues to run federal deficits, it needs to sell bonds to run the government. These bonds must be purchased by the investment community and if the appetite going forward remains tepid, it will put a limit to rate improvement.

Initial Claims Rise

In another sign that the labor market is cooling off, Initial Claims for the past week rose well above expectations. This forward-looking index on labor market health shows more people filing for first-time unemployment benefits. If this trend continues and elevates the unemployment rate, it will strengthen the case for a Fed rate cut sooner.

4.50

The 10-year Note, which ebbs and flows with 30-year mortgage rates, has declined from the highs of the year and is residing near 4.50%. For rates to improve further, we want to see the 10-yr move beneath 4.50% and then 4.35%. Look at the chart section below to see similar technical headwinds for mortgage-backed securities and mortgage rates.

Bottom line: We must remember the Fed is not hiking rates and they are not cutting rates, so further improvement will be in response to the data. Next week, things heat up.