Overview: With little fresh news over the past week, investors continued to push global bond yields lower due to concerns about the pace of global economic growth and expectations for looser monetary policy from central banks around the world. U.S. mortgage rates ended at the lowest levels in over a year.
The latest news from the housing sector was mixed, as lower mortgage rates helped boost sales activity, but construction of new homes fell short. In February, sales of previously owned (existing) homes jumped 12% from January, which was far more than expected. The inventory of homes for sale remained tight at a 3.5-month supply, though, which was still well below the 6.0-month supply that is viewed as a healthy balance between buyers and sellers. The median existing-home price was 4% higher than a year ago.
Despite the clear need for a greater supply of homes, especially at the lower end of the market, a number of factors continue to constrain builders. In February, single-family housing starts plunged 17% from January to the lowest level since May 2017. Permits to build single-family homes, a leading indicator, were nearly unchanged. Rising labor costs, a lack of available land in desirable regions, and high regulatory standards are some of the primary obstacles holding back new construction.
Looking ahead, the core Personal Consumption Expenditures (PCE) Price Index, the inflation indicator favored by the Fed, and the New Home Sales report will be released on Friday. The Institute for Supply Management (ISM) Manufacturing Index will come out on April 1 and the ISM Services Index on April 3. The next monthly Employment Report is scheduled for April 5. In addition, news about the British exit (Brexit) from the European Union also could influence mortgage rates.