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This week's additional extremely positive news about progress on a Covid vaccine caused investors to be more optimistic about the long-term economic outlook, but rising coronavirus case counts increased their concerns about short-term economic activity. These influences offset each other, and the net result was that mortgage rates remained near record low levels.
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Following sharp declines in March and April due to the partial shutdown of the economy, retail sales have shown six straight months of gains, but the latest report released on Tuesday fell short of expectations. In October, retail sales increased just 0.3% from September, below the consensus forecast for an increase of 0.5%, and the September results were revised lower. Some investors are worried that the pandemic will hold back consumer spending during the important holiday shopping season.
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By contrast, one sector of the economy which has continued to exceed expectations is housing. The spectacular rebound in the housing market from weakness during the spring due to the partial shutdown of the economy has continued. In October, existing home sales increased 4% from September and were 27% higher than a year ago, at the best level since 2006. The median existing-home price was 16% higher than a year ago, at a new record of $313,000.
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Inventory levels were down 20% from a year ago and remained the primary obstacle to even stronger sales activity. The number of homes for sale was at just a 2.5-month supply nationally, well below the 6.0-month supply which is considered a healthy balance between buyers and sellers. However, this week's other housing market reports contained encouraging news in this area. In October, single-family housing starts rose 6% from September to the highest level since 2007. In addition, the National Association of Home Builders (NAHB) housing index revealed that builder confidence surged to 90, far above the consensus of 85, and crushing last month's record high.
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Looking ahead, investors will continue watching Covid case counts, progress on vaccines, and government stimulus measures. Beyond that, New Home Sales, Durable Orders, and the core PCE price index, the inflation indicator favored by the Fed, will be released on Wednesday. Mortgage markets will be closed on Thursday for Thanksgiving.
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| Weekly Change |
| 10yr Treasury |
fell |
0.05 |
| Dow |
fell |
200 |
| NASDAQ |
rose |
50 |
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| Calendar |
| Wed |
11/25 |
Core PCE |
| Wed |
11/25 |
New Home Sales |
| Wed |
11/25 |
Durable Orders |
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All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
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