Overview: Following the aggressive monetary policy tightening by the Federal Reserve at last week’s meeting, mortgage rates reached their highest levels since 2008. This week, however, heightened concerns about slowing global economic growth have caused rates to decline from their peak.
Rising mortgage rates have created headwinds for the housing market in recent months. Sales of existing homes in May posted an expected small decline from April to the lowest level since June 2020 and were 9% lower than last year at this time. Inventory levels remained extremely low, down 4% from a year ago, at just a 2.6-month supply nationally. The steadily rising median existing-home price was 15% higher than a year ago, at a record $407,600.
More inventory is badly needed in many regions, but the most recent report on home construction was disappointing. In May, housing starts fell 14% from April, far below the consensus forecast, to the lowest level since April 2020. Building permits, a leading indicator of future activity, also fell short of expectations with a 7% decline from April. The same ongoing issues continued to hamper builders, including higher prices and shortages for land, materials, and skilled labor.
In his semiannual testimony to Congress on Wednesday, Fed Chair Powell again emphasized a strong commitment to bringing down inflation. He said that additional rate hikes will be appropriate at a pace that will be determined by the “incoming data and the evolving outlook for the economy.” He noted that the war in Ukraine and the shutdowns in China due to COVID were adding to inflationary pressures.
Existing-Home Sales (millions)
June 24 — New-Home Sales report
June 27 — Pending Home Sales (PHS) Index
June 30 — Core Personal Consumption Expenditures (PCE) Price Index