Housing Inventory Climbs Higher

Overview: Mortgage markets were relatively quiet over the past week. While consumer spending was stronger than expected, its impact was minor. Mortgage rates ended the week slightly lower.

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Since consumer spending represents over two-thirds of U.S. economic activity, it is an important indicator of the strength of the economy. During periods of uncertainty about the outlook for the labor market, consumers often reduce their purchases, and recent confidence surveys have reported these concerns. However, retail sales in June rose 0.6% from May, far more than the consensus forecast for an increase of just 0.2%, and they were a substantial 4% higher than a year ago. Categories including motor vehicles, home improvement, and apparel displayed the most strength. More surprisingly, spending at restaurants and bars also increased significantly in June, even though eating out tends to be one of the first discretionary items scaled back if consumers are worried.

In June, sales of existing homes fell 3% from May, more than the consensus forecast. The median existing-home price of $435,300 was up 2% from last year at this time, which is a record high for the month of June. Inventory levels remain low, standing at just a 4.7-month supply nationally, which is below the 6-month supply that’s considered typical in a balanced market. The trend is positive, however, as inventories were 16% higher than a year ago.

The latest home building data contained mixed news. After falling to the lowest level in five years last month, overall housing starts in June rose 5% from May, which was close to the consensus forecast. However, the strength was entirely due to volatile multi-family units, which surged 30%, while single-family starts fell slightly. Single-family building permits, a leading indicator of future construction, dropped for the fourth straight month to the lowest level in more than two years. A separate survey of home builder sentiment on housing market conditions from the National Association of Home Builders (NAHB) rose slightly from the lowest level since 2022, matching expectations. Builders reported that uncertainty about tariffs and rising costs made it difficult to price their homes.

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Retail Sales (% change)

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Week Ahead

July 24

New-Home Sales report

European Central Bank meeting

July 29

Consumer Confidence Index

July 30

Federal Reserve meeting

Q2 gross domestic product (GDP)