Overview: Sandwiched between last week’s highly anticipated Federal Reserve meeting and the key G20 summit coming up this weekend, there was no economic news of comparable magnitude over the past week. Comments from the Fed and economic reports caused a little volatility, but mortgage rates ended the week nearly unchanged.
The recently released data from the housing sector was mixed. In May, sales of previously owned (existing) homes rose 3% from April, which was above the expected levels. After a period of weakness near the end of 2018, this marked four straight months of healthier levels of activity. The median existing-home price was 5% higher than a year ago. The inventory of homes for sale was up to a 4.3-month supply and was 3% higher than a year ago. Since existing home sales make up roughly 90% of the market, this report was encouraging.
By contrast, new home sales, which account for the remaining 10% of the market, missed the mark by a wide margin in May. Sales of new homes declined 8% from April to the lowest level since December 2018 and were 4% lower than a year ago. Analysts continued to attribute the weakness to a shortage of affordable new homes in the lower price ranges.
Tuesday, investors scaled back their expectations for the pace of monetary policy loosening after a speech by Fed Chair Jerome Powell. Recent comments from the Fed and the European Central Bank had caused some investors to think that the Fed would cut rates by a massive 50 basis points at the next meeting on July 31. While Powell supported the idea that the current economic outlook might justify a reduction in the federal funds rate, his comments made it seem less likely that rate cuts will take place at such a rapid pace.
Looking ahead, the core Personal Consumption Expenditures (PCE) Price Index, the inflation indicator favored by the Fed, will be released on Friday. The Institute for Supply Management (ISM) Manufacturing Index will come out on July 1, followed by the ISM Services Index on July 3. The next key Employment Report will be released on July 5. In addition, the trade negotiations with China are expected to resume this weekend at the G20 meeting and likely will influence mortgage rates.