Overview: In a light week for economic news, there were no significant surprises, and mortgage rates ended the week slightly lower.
Wednesday’s data revealed that sales of existing homes declined for a fourth straight month. In July, existing home sales, which account for roughly 90% of the market, decreased slightly from June and were 2% lower than a year ago. A continued lack of inventory in many regions was one major factor in the decline in sales. In July, the inventory of existing homes for sale fell a bit from June and was flat from a year ago.
An increased supply of homes is sorely needed, and the latest data on new construction was not encouraging. In July, housing starts increased just 1% from the downwardly revised June reading, which was the lowest in nearly two years. The modest increase was nearly equal for both single-family and multi-family units. After reaching a 10-year high in November 2017, single-family homebuilding has been trending lower. Builders point to skilled labor shortages and rising material costs as obstacles to new construction. On the positive side, building permits matched the expected levels in July.
Looking ahead, the New Home Sales report will be released on Thursday. The Durable Goods report, an important indicator of economic activity, will come out on Friday. The second estimate of second quarter gross domestic product (GDP), the broadest measure of economic growth, will be released on August 29, as well as the Pending Home Sales (PHS) Index. The core Personal Consumption Expenditures (PCE) Price Index, the inflation indicator favored by the Fed, will be released on August 30.