Overview: Over the past week, there was little reaction to the economic data, and the minutes from the May 1 Federal Reserve meeting contained no surprises. Mortgage rates ended slightly higher.
The latest data from the housing sector revealed that lower mortgage rates failed to boost sales activity. In April, sales of previously owned (existing) homes fell a bit from March, while the consensus forecast was for a modest increase.
The news about the supply of homes was more positive, however. In April, the inventory of homes for sale increased to a 4.2-month supply and was 2% higher than a year ago. In addition, housing starts rose 6% from March, which was well above the expected levels. Similar strength was seen in both single-family and multi-family units. Since sales activity in many regions has been constrained by a lack of inventory, this was encouraging news for the housing market.
The minutes from the May 1 Fed meeting released on Wednesday indicated that Fed officials believe the current weakness in inflation will be temporary. If inflation remains low over “coming quarters,” however, several officials likely would support looser monetary policy. The minutes did not alter the widely held outlook that Fed policy will not change any time soon.
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. In addition, news about the ongoing trade negotiations between the U.S. and China could affect mortgage rates. Mortgage markets will close early on Friday and will be closed on Monday in observance of Memorial Day.