Over the past week, headlines about Ukraine and shifting expectations for future Federal Reserve policy caused some daily volatility for mortgage markets. These movements were offsetting, however, and mortgage rates ended the week with little change, at the highest levels since the middle of 2019.
Investors have responded to the conflict between Russia and Ukraine in the standard manner for geopolitical events of this nature. When tensions increase, they shift from risky assets such as stocks to relatively safer assets such as bonds, including mortgage-backed securities (MBS). The added demand for MBS is favorable for mortgage rates. When the news suggests an easing of tensions, the reverse takes place.
Sales of existing homes rose 7% in January, far above the consensus forecast for just a slight increase. Inventory levels were down 17% from a year ago, at just a 1.6-month supply nationally, well below the 6-month supply that is considered a healthy balance between buyers and sellers, and at a record-low level. The median existing-home price was 15% higher than last year at this time at $350,300. Investors accounted for 22% of sales, up from 15% a year ago. With additional inventory desperately needed in many regions, the monthly reports on housing starts have gained attention, and the most recent data contained mixed results. In January, housing starts unexpectedly decreased 4% from December. By contrast, building permits, a leading indicator of future activity, unexpectedly surpassed the consensus forecast, rising to the highest level since 2006. Builders continued to report higher prices and shortages for land, materials, and skilled labor as significant obstacles.
Existing-Home Sales (millions)
Feb. 24 — New-Home Sales report
Feb. 25 — Core Personal Consumption Expenditures (PCE) Price Index
Mar. 1 — Institute for Supply Management (ISM) Manufacturing Idex
Mar. 3 — ISM Services Index
Mar. 4 — Employment Report