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Home Sales Fall


Overview: Since the release of the Consumer Price Index (CPI) inflation report on November 14, there has been little major economic news affecting mortgage markets. A favorable speech from an influential Federal Reserve official caused the largest reaction, and rates ended the week lower.

 

In a speech on Tuesday, the Fed’s Christopher Waller suggested that the Fed may be finished raising the federal funds rate and that rate cuts may be coming next year. He talked about the significant gains in the battle against inflation and said that he is “increasingly confident” that current monetary policy will get inflation back down to the 2% annual target. He added that he could see the Fed starting to lower rates if inflation continues to ease over the next three to five months. After his unexpectedly dovish (favoring looser monetary policy) comments, investors are now anticipating that there will be as many as four 25 basis-point rate cuts in 2024, with the first taking place most likely in May. This conflicts with the most recent Fed forecast for just one rate cut next year.

Higher mortgage rates and a shortage of inventory continued to restrain housing market activity in October, before the significant decline in mortgage rates this month took place. Sales of existing homes, which currently make up about 85% of the market, fell 4% from September and were 15% lower than last year at this time. This was the slowest sales pace since August 2010. Inventory levels stand at just a 3.6-month supply nationally, well below the 6-month supply typical in a balanced market. The median existing-home price of $391,800 was 3% higher than a year ago.


The latest results were similar for the segment containing newly constructed homes. In October, new-home sales, which account for the remaining 15% of the market, fell short of expectations with a decline of 6% from September. In addition, the figures for September were revised significantly lower. Despite the recent weakness, sales were still 18% higher than a year ago. The median new-home price of $409,300 was a massive 18% lower than last year at this time, and builders have been widely reporting offering financial incentives to try to lure buyers.


 

Existing-Home Sales (millions)




 
Week Ahead

November 30

Personal Income and Outlays

Personal Consumption Expenditures (PCE) Price Index


December 4

ISM Services Index


December 5

Job Openings and Labor Turnover Survey (JOLTS) report


December 8

Employment Report


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