Overview: Recently, progress on COVID vaccines has caused investors to be more optimistic about the long-term economic outlook, while rising coronavirus case counts have increased their concerns about short-term economic activity. These influences have roughly offset each other, and mortgage rates have remained near record-low levels.
The impressive rebound in the housing market has continued. In October, existing-home sales increased 4% from September and were 27% higher than a year ago, at the best level since 2006. The median existing-home price was 16% higher than a year ago, at a new record of $313,000. The primary obstacle to even stronger sales activity again was a lack of inventory in many regions. The number of homes for sale was at just a 2.5-month supply nationally, well below the 6-month supply that is considered a healthy balance between buyers and sellers.
Sales of new homes continued at a rapid pace in October as well. New-home sales have maintained an annualized rate of around one million units for four straight months, the best levels since 2006. Builders say that they are eagerly moving as quickly as possible to address the need for more homes, but that a lack of land, labor, and materials is limiting the pace of construction.
The reduced economic activity resulting from the pandemic has caused a decline in inflation, which has helped keep mortgage rates low. In October, the core Personal Consumption Expenditures (PCE) Price Index was just 1.4% higher than a year ago, down from an annual rate of increase of 1.5% last month. Core PCE is the inflation indicator favored by Federal Reserve officials, and their stated target is 2%.
Investors will continue to watch for news about vaccines and negotiations for additional government stimulus measures. In addition, the monthly Employment Report will be released on Friday, and these figures on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month.
Existing Home Sales (millions)