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Home Sales Surge as Mortgage Rates Tumble

Overview: Increased concerns about the spread of the coronavirus caused investors to shift to safer assets over the past week, and mortgage rates reached the lowest levels since 2012.


While the number of reported cases of the coronavirus in China may be stabilizing or declining, investors grew more concerned about its recent spread in other countries such as Italy and South Korea. In relation to mortgage rates, the main question is how much the coronavirus will slow global economic growth due to people’s unwillingness to go to work, travel, or participate in other public activities. As the scope of the outbreak has broadened, investors generally have continued to reduce the level of risk in their portfolios. This shift to safer assets has been favorable for bonds, including mortgage-backed securities (MBS).

Helped by low mortgage rates, home sales activity has picked up over the last couple of months. In January, sales of previously owned (existing) homes, which make up about 90% of the market, were close to December’s levels and 10% higher than a year ago. The readings over the last two months were stronger than any seen during the first 11 months of 2019. However, the number of homes for sale was at just a 3.1-month supply nationally and 11% lower than a year ago.

January new home sales, which account for the remaining 10% of the market, unexpectedly increased 8% from December to the highest level since July 2007 and were 19% higher than a year ago. Unlike existing home sales, which are based on actual closings, new home sales measure contracts signed during the month and are viewed as a better indicator of more recent activity.

Existing Home Sales (millions)

Week Ahead

February 28 — Core Personal Consumption Expenditures (PCE) Price Index

March 2 — Institute for Supply Management (ISM) Manufacturing Index

March 5 — ISM Services Index

March 6 — Employment Report

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