Home Sales Jump

Overview: With a lack of major economic news, mortgage markets were relatively quiet over the past week. Mortgage rates have moved slightly higher since the Federal Reserve meeting a week ago but remain near their lowest levels of the year.

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The New-Home Sales report caught economists by surprise this week. In August, new-home sales, which account for roughly 15% of the total market, increased 21% from July, far above the consensus forecast. Sales were up 15% from last August, reaching the highest level since January 2022. The median new-home price of $413,500 rose 2% from a year ago. In contrast to existing-home sales, which measure actual closings during the month, new-home sales are based on contracts signed, making them a leading indicator of future housing market activity. 

The latest news about home building was not nearly as encouraging, however. The New Residential Construction report showed that housing starts in August fell 9% from July to an annual rate of 1.31 million, well below the consensus forecast of 1.37 million. Single-family starts declined 7% from July and were 12% lower than a year ago, marking the lowest level since April 2023. Single-family building permits, a leading indicator of future construction, dropped for the sixth consecutive month to the lowest level since March 2023. A separate survey of home builder sentiment on housing market conditions from the National Association of Home Builders (NAHB) remained at the lowest level since 2022. Builders reported that weak buyer traffic and rising costs remained the primary obstacles to a faster pace of construction. 

Lower rates were beneficial for mortgage applications over the last couple of weeks, according to the Mortgage Bankers Association (MBA). Refinance applications surged about 60% from two weeks ago and were an impressive 42% higher than one year ago. The average loan size for refinances rose to a record high. The share of adjustable-rate mortgages (ARMs) for refinances climbed to 12.9% of total applications, the highest level since 2008. Purchase applications increased a little from two weeks ago and were up 18% from this time last year.

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Single-Family Housing Starts (thousands)

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Week Ahead

Sept. 25

Existing-Home Sales report

Sept. 26

Personal Income and Outlays

Personal Consumption Expenditures (PCE) Price Index

Oct. 1

Institute for Supply Management (ISM) Manufacturing Index

Oct. 3

Employment Report