Home Sales Remain Strong

It was a relatively uneventful week for mortgage markets, and rates ended a little lower, a bit above the record low levels seen late in 2020. 

Inventory levels, however, were down 23% from a year ago to record lows and remained the primary obstacle to even stronger sales activity. The number of homes for sale was at just a 1.9-month supply nationally, well below the 6.0-month supply which is considered a healthy balance between buyers and sellers. Encouragingly, though, Thursday's report on housing starts contained more optimistic news in this area. In December, single-family housing starts unexpectedly rose 12% from November and were 28% higher than a year ago. This was the eighth straight month of gains. Similarly, single-family building permits, a leading indicator of future construction, increased 8% from November and were 30% higher than a year ago.

The European Central Bank (ECB) made no policy changes at Thursday's meeting and repeated that its massive bond purchase program will run until at least March 2022. The meeting statement said that the ECB "decided to reconfirm its very accommodative monetary policy stance."

Looking ahead, investors will continue watching Covid case counts and vaccine distribution. The next Fed meeting will take place on Wednesday. Recent comments from officials have made it clear that rate hikes will not be seen any time soon, so investors mainly will be looking for guidance on the Fed's inflation outlook and its bond purchase program. Beyond that, fourth quarter GDP, the broadest measure of economic activity, will be released on Thursday. The core PCE price index, the inflation indicator favored by the Fed, will come out on Friday.