While the stock market posted nice gains this week, mortgage markets stayed relatively quiet despite the coronavirus pandemic. Daily volatility remained low. Thus, mortgage rates experienced a miniscule change.
Coronavirus Pandemic Drives Down Inflation
Due to the reduced economic activity caused by the coronavirus pandemic, inflation saw a decline. Because of this, mortgage rates stay low.
In April, the core PCE price index, the indicator favored by the Fed, rose just 1.0% higher than a year ago. Additionally, the core PCE declined from an annual rate of increase of 1.7% last month. Fed officials stated that their target level for annual inflation is 2.0%.
Terrible Month for Housing Activity
April’s housing data confirmed terrible sales activity in April because of the coronavirus pandemic. However, it also contained interesting results that hinted at pent-up demand. For example, April pending home sales, which measure contracts signed for previously owned homes, plunged 22% from March and decreased 34% compared to a year ago.
By contrast, contracts signed for sales of new homes in April unexpectedly rose slightly from March. Currently, contracts remain at just 6% lower than a year ago. While buyers and sellers showed hesitation towards tours of existing homes during the pandemic, the greater availability of contactless visits offered by new homes appears to have made a big difference. In addition, the Mortgage Bankers Association (MBA) reported that mortgage applications to purchase a home increased for six straight weeks and are up more than 50% from their April lows.
Looking Ahead Towards the Coronavirus Pandemic
Looking ahead, investors continue to watch for news about the coronavirus pandemic. Also, investors look for updates on medical advances, Fed actions, government stimulus programs, and plans for reopening the economy. In addition, the ISM national manufacturing index releases on Monday. Meanwhile, the ISM national services index publishes on Wednesday.
Beyond that, the monthly Employment report releases on Friday. These figures on the number of jobs, the unemployment rate, and wage inflation reflect the most highly anticipated economic data of the month.
Following the latest news regarding the coronavirus pandemic, mortgage rates barely changed. Never miss an update with MBSQuoteline. To receive by-the-minute updates on mortgage-backed securities, try our platform free for 14 days.
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