After the previous bounce back, this past week saw home sales stumble. Meanwhile, mortgage rates also ended the week a little lower. This is, of course, after they reached their highest levels in months last week.
However, the weaker-than-expected housing reports and tame inflation data helped support the decline in mortgage rates.
Home Sales Stumble
To date, home sales have bounced back after last spring. At the onset of the global coronavirus pandemic, the economy saw a widespread shutdown. Rounding out the first quarter of 2021, home sales have mostly regained their momentum, remaining at very high levels for months on end.
The pace slowed a bit in February. Many attribute this to higher mortgage rates. In addition, numerous regions of the United States faced the backlash of severe weather conditions. Ultimately, the home sales stumble came about when existing home sales fell 7% from January. Therefore, the economy saw a larger-than-anticipated decline. That said, existing home sales were still 9% higher than a year ago.
Limited Inventory Contributes to the Home Sales Stumble
The median existing-home price was 16% higher than last year at this time. This is a new record for the month of February, valued at $313,000.
On the other hand, housing inventory levels declined 30% from a year ago, reaching the lowest level since 1982. The number of homes for sale was at just a 2-month supply nationally. This is well-below the 6-month supply. Generally, economists consider a 6-month supply to be a healthy balance between home buyers and home sellers.
Another Inflation Decline
The reduced economic activity resulting from the pandemic caused a significant decline in inflation last year. This contributed to 2020’s record-low mortgage rates.
Moving forward, the vaccine rollout is quickly progressing. Subsequently, the United States economy is reopening across several states. Investors worry that inflation may be heading higher as a result.
Fortunately, the latest data revealed no signs of this. In February, the core PCE price index was just 1.4% higher than a year ago. This statistic decline from an annual rate of increase of 1.5% last month. The core PCE is also well below the Fed’s stated target level of 2.0%.
Altogether, the tame inflation report in tandem with the recent stumble of home sales kept mortgage rates down this past week.
Unemployment Insurance Claims
The Department of Labor releases the total number of new claims for unemployment insurance each week. The latest reading dropped to 684,000. This reading is the lowest level in over a year.
Overall, the new unemployment claims declined significantly from the inflated figures seen during the early months of the pandemic. Conversely, unemployment claims hover well above the readings around 250,000 which were typical during 2019. As the economy reopens, jobless claims should continue to decline.
Looking Ahead After Home Sales Stumble
Looking ahead after home sales stumble, investors continue monitoring the market. As with previous reports, the primary focus lays with COVID-19 case counts and vaccine distribution.
Beyond that, the ISM national manufacturing index releases on Thursday. Also, the key monthly Employment report releases on Friday. For economists and investors, they view the number of jobs, the unemployment rate, and wage inflation as the most highly anticipated economic data of the month.
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