Impressive Home Sales

September 30, 2020

 

Overview: A return to lockdown measures in many countries due to an increase in coronavirus cases was favorable for mortgage rates over the past week, while the U.S. economic data had little impact. Rates declined slightly and are close to record low levels.

For months, health experts have been warning that coronavirus cases may increase in the fall during the traditional flu season, as school resumes and people spend more time indoors. Investors have grown more concerned recently that this is taking place in many regions, particularly in Europe. Several major European countries have reported rising case counts over the last few weeks, and some are imposing stricter lockdown measures. Since slower economic growth reduces the outlook for future inflation, these measures, which restrict economic activity, help keep mortgage rates low.

 

The housing market continues to experience an unexpectedly strong performance following the temporary slump seen earlier this year. In August, pending home sales, which reflect contracts signed to purchase previously owned homes, jumped to a record level and were 24% higher than a year ago. Sales of new homes in August were similarly impressive as they exceeded an annual rate of one million units for the first time since 2006 and were 43% higher than a year ago. A lack of inventory has been holding back even stronger sales activity. There is a roughly 3-month supply of homes for sale, far below the 6-month supply that is considered a healthy balance between buyers and sellers.

 

New Home Sales (thousands)

 

Week Ahead

October 1 — Core Personal Consumption Expenditures (PCE) Price Index

October 1 — Institute for Supply Management (ISM) Manufacturing Index

October 2 — Employment Report

October 5 — ISM Services Index

 

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