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Housing Recovery Continues

Overview: Little significant economic data came out over the past week, and investors mostly focused on the rising number of coronavirus cases in several states. Mortgage markets were relatively quiet, and rates ended the week nearly unchanged.


While news from the housing sector was mixed, the more recent results suggest that a strong recovery in housing market activity is underway. In May, sales of previously owned (existing) homes fell short of expectations with a decline of 10% from April and were substantially lower than a year ago. National median existing-home prices were up 2% from a year ago. Sales activity again was held back by a lack of inventory in many regions, as the number of homes for sale was at just a 4.8-month supply nationally and was 19% lower than a year ago.

A key point to consider, however, is that existing-home sales measure actual closings, which reflect contracts signed a month or two earlier. In this case, the May report on existing-home sales was determined primarily by activity that took place during March and April, when much of the economy had shut down. By contrast, contracts signed during the month form the basis for the report on new home sales. In May, new home sales increased a stronger than expected 17% from April and were up significantly from a year ago.

In addition, the Mortgage Bankers Association (MBA) reported that mortgage applications to purchase a home were 18% higher than a year ago, and refinance applications were a stunning 76% higher. According to the MBA, average contract interest rates for 30-year fixed-rate mortgages with conforming loan balances were at record-low levels in the week ending June 19. In short, housing activity appears to have picked up considerably in May and June, helped by low mortgage rates.

Existing Home Sales (millions)

Week Ahead

June 26 — Core Personal Consumption Expenditures (PCE) Price Index

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

July 3 — Employment Report

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