Market Update: Rates Unchanged; NAHB Housing Market Index, Housing Starts and Building Permits, and Existing Home Sales Coming Up This Week

Blog posted On July 18, 2022

Last week, mortgage rates were relatively unaffected by the rising inflation levels reported by the consumer price index. Most people would typically expect a drastic shift higher in rates since inflation is the enemy of bonds, and the bond market influences rates. While rates did begin to trend slightly higher – it was not as big of a jump as expected. The cause? As inflation continues to climb higher in the current economic state, “the market increasingly sees [it] (and the Fed's necessary policy response) as resulting in recession,” writes Matthew Graham, COO of Mortgage News Daily. When economic activity slows (recession symptoms), rates tend to trend lower.

This week, there are several important housing market reports scheduled for release. The National Association of Home Builders (NAHB) is releasing its home builder sentiment index this morning. Housing starts and building permits will be released Tuesday morning, and existing home sales will be released Wednesday morning.

The National Association of Home Builders’ (NAHB) housing market sentiment index is based on a survey of home builders’ perceptions on current sales activity, sales expectations for the next six months, and buyer foot traffic.  Any reading above 50 is considered positive. In June, home builder sentiment fell to a level of 67 as rising mortgage rates continue to sway the construction outlook.

Housing starts track ground broken on residential projects and building permits track permits issued. In May, building permits fell 7% to a level of 1.70 million. Housing starts fell 14.4% to a level of 1.55 million. Experts predict that June’s level of housing starts will rise to a level of 1.59 million.

Existing home sales or resales track the sales of previously constructed homes and make up approximately 90% of residential real estate transactions. Existing home sales slipped 3.4% in May, falling to a level of 5.41 million. Though many see this as a sharp negative decline, National Association of REALTORS® (NAR) Chief Economist Lawrence Yun reminds us that home sales have simply “returned to the levels seen in 2019 – prior to the pandemic – after two years of gangbuster performance.” This decline is helping replenish the dangerously low level of existing home inventory. “Total housing inventory registered at the end of May was 1,160,000 units, an increase of 12.6% from April,” read the NAR report. Unsold inventory sits at a 2.6-month supply at the current sales pace, up from 2.2 months in April and 2.5 months in May 2021.”

With more homes on the market, home buyers not only have more options, but they also will likely see more price cuts. Now’s a great time to get preapproved and take advantage of the market! Click the ‘Get Started’ button above to learn more.

Sources: Bloomberg, Mortgage News Daily, Mortgage News Daily