Market Perspective

New-Home Sales Soar; Fed Policy Unchanged


Overview: It was a quiet week for mortgage markets. Wednesday’s Federal Reserve meeting contained no surprises, and the housing data was mixed. Mortgage rates ended the week slightly higher.

As expected, the Fed did not adjust the federal funds rate, and its statement contained no significant changes. Notably, the Fed did not give any indication of altering its current $120 billion monthly pace of bond purchases. In addition, most officials expect that the federal funds rate will remain at current levels, near zero, through 2023. Nevertheless, given the very strong inflation and growth forecasts from most economists, investors will continue watching closely for signs that the Fed will begin to tighten monetary policy.


Sales of previously owned (existing) homes, which make up about 90% of the market, have remained at very high levels since last summer. The pace slowed a little in February and March, however, due to a lack of inventory in many regions, higher mortgage rates, and severe weather in some areas. In March, existing-home sales fell 4% from February, but still were 12% higher than a year ago. The median existing-home price was 17% higher than last March, at a new record of $329,100. Inventory was down 28% from a year ago and remained near the lowest levels since 1982. The number of homes for sale was at just a 2.1-month supply nationally, well below the 6-month supply that is considered a healthy balance between buyers and sellers.


New-home sales, which account for the remaining 10% of the market, saw much stronger sales activity. In March, new-home sales jumped 21% from February to the highest level since 2006. Demand for both new- and existing-homes continued to be exceptionally strong, and the difference in the results for the two reports reflected the available supply of each type of home.

Existing-Home Sales(millions)

Week Ahead

April 29 — First-quarter gross domestic product (GDP)

April 30 — Core Personal Consumption Expenditures (PCE) Price Index

May 3 — Institute for Supply Management (ISM) Manufacturing Index

May 5 — ISM Services Index