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Although the data on consumer spending and housing released this week revealed much stronger than expected results, it was a quiet week for mortgage markets, and rates ended a little lower.
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Due to the shutdown of much of the economy to combat the coronavirus, consumer spending dropped sharply in March and April. A swift rebound appears to be underway, however, as the results for May more than doubled the expected gains. In May, retail sales surged a record 18% from April, and strength was seen in a wide range of areas. In particular, spending at clothing stores jumped 188% from April, and furniture sales posted a monthly increase of 90%.
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The housing market also seems to be recovering more quickly than expected. In May, housing starts increased modestly from April, while building permits, a leading indicator of future construction, rose 14% from April. The NAHB housing index showed that home builder confidence shot up from 37 to 58, which was far above the consensus forecast. Several large home building companies have commented that they are hiring back workers and restoring disrupted supply chains for materials as quickly as possible to help meet the unexpectedly large demand for homes. Since a lack of inventory has been holding back home sales in many regions, this news was very encouraging.
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One of the reasons for the strong demand for housing is a desire from some people to move to less crowded areas in light of the pandemic. Another factor is low mortgage rates, supported by tame inflation and bond purchases from the Fed. Both Freddie Mac and the Mortgage Bankers Association reported that average rates for 30-year fixed-rate mortgages dropped to record low levels this week. In addition, the MBA revealed that applications to purchase a home increased for the ninth straight week and have reached the highest level in over 11 years.
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Looking ahead, investors will continue to watch for news about medical advances, government stimulus programs, Fed monetary actions, and plans for reopening the economy. Beyond that, Existing Home Sales will be released on Monday and New Home Sales on Tuesday. The core PCE price index, the inflation indicator favored by the Fed, will come out on Friday.
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| Weekly Change |
| 10yr Treasury |
flat |
0.00 |
| Dow |
rose |
600 |
| NASDAQ |
rose |
400 |
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| Calendar |
| Mon |
6/22 |
Existing Home Sales |
| Tue |
6/23 |
New Home Sales |
| Fri |
6/26 |
Core PCE |
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All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
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