Overview: Ahead of key central bank meetings in the U.S. and Europe, it was a relatively quiet week for mortgage markets. The reports on housing and consumer spending caused little reaction, and mortgage rates ended the week roughly unchanged.
Higher mortgage rates have hurt housing market activity in recent months. Sales of existing homes in June fell more than expected from May to the lowest level since June 2020 and were 14% lower than last year at this time. Inventory levels were 2% higher than a year ago, the first annual increase in three years, but still were at just a 3-month supply nationally. This remains far below the 6-month supply that is considered a healthy balance between buyers and sellers. The steadily rising median existing-home price was 13% higher than last year at this time at a record $416,000.
Homebuyers desperately need more inventory in many regions, but the most recent data on housing starts was somewhat disappointing. In June, overall housing starts decreased slightly from May to the lowest level since September 2021. Single-family starts declined 8% from May to the worst level in two years and were 16% lower than last year at this time. A separate survey of builder sentiment plunged to the lowest reading since May 2020, shortly after the start of the pandemic. Builders again reported higher prices and shortages for land, materials, and skilled labor as issues holding back the pace of construction.
In June, retail sales rose a substantial 1% from May, beating expectations. After being hit especially hard by the pandemic, bar and restaurant sales continued their steady recovery with solid gains in June and were substantially higher than a year ago. Furniture sales were particularly strong in June, but sales at department stores posted the largest declines. Despite rising prices, consumer spending has been extremely strong so far this year.
Looking ahead, the next European Central Bank meeting will take place on July 21, and the first rate increase in over a decade is anticipated. The Consumer Confidence Index and New-Home Sales report will be released on July 26. In addition, the next U.S. Federal Reserve meeting will take place on July 27, and most investors expect a 75 basis-point increase in the federal funds rate. Investors also will look for additional guidance on the pace of future rate hikes and bond portfolio reduction.
Existing-Home Sales (millions)