Overview: Over the past week, the primary economic news came from the surprisingly strong housing sector. Mortgage rates experienced some volatility during the week but ended with little net change.
The past week’s housing data has again revealed that recovery from the economic impact of the coronavirus has been much faster than anticipated. In July, sales of previously owned (existing) homes, which make up about 90% of the market, unexpectedly jumped a record 25% from May to the best level since 2006. National median existing-home prices were up 9% from a year ago. A shortage of inventory remained the primary trouble spot, as the number of homes for sale was at just a 3.1-month supply nationally, well below the 6.0-month supply that is considered a healthy balance between buyers and sellers.
New home sales, which account for the remaining 10% of the market, also far exceeded the consensus forecast. In July, they too rose to the best level since 2006 and were 36% higher than a year ago. Unlike existing home sales, which are based on closings, new home sales measure contracts signed during the month.
On August 12, the Federal Housing Finance Agency (FHFA) unexpectedly announced that a new refinance fee of 0.5% will be assessed for cash-out and no-cash-out refinances sold to Fannie Mae and Freddie Mac after September 1. Many members of the mortgage industry quickly expressed strong disapproval of the new policy. In response, the FHFA announced on Wednesday that the implementation date for the new 0.5% fee will be postponed from September 1 to December 1 and that refinance loans with loan balances below $125,000 will be exempted.
Looking ahead, investors will continue focusing on news about medical advances to fight the pandemic, government stimulus programs, Federal Reserve monetary actions, and the pace of the reopening of the economy. Beyond that, Fed Chair Jerome Powell will be speaking on Thursday from a virtual version of the annual Jackson Hole summit. The core Personal Consumption Expenditures (PCE) Price Index, the inflation indicator favored by the Fed, will come out on Friday. The next monthly Employment Report will be released on September 4.
Existing Home Sales (millions)