Mixed Home Sales Leave The Market Uncertain
After many weeks with higher than usual volatility due to the Greek debt issues, the past week was a very quiet one for mortgage rates. Greece was no longer a market moving factor, and the economic calendar was very light. Mortgage rates ended a little lower.
The recently released housing data contained mixed news. June existing home sales increased 3% from May to the highest level since February 2007, and they were 10% higher than a year ago. Strong demand and limited inventory continued to push prices higher, and the median existing home price reached an all-time high. By contrast, June new home sales declined 6% from May to the lowest level since November, falling well short of expectations.
Although both reports cover activity in June, existing home sales counts closings, while new home sales measure signed contracts. As a result, the latter report reflects more current activity. However, new home sales make up just 10% of single-family home purchases, a small data set, while existing home sales account for 90%. As a result, readings for new home sales are very volatile month to month.
Over the past week, investors grew more concerned about the pace of global economic growth. There have been several indications that growth is slowing in China and Latin America. In particular, a number of large U.S. companies with global sales pointed to these two regions as the cause of weaker than expected earnings. While this was bad news for stocks, it was positive for mortgage rates, since slower growth reduces inflationary pressures.
Looking ahead, the main focus will be Wednesday’s Fed meeting. Investors will be looking for guidance about the timing of the first federal funds rate hike. Before that, Durable Orders, an important indicator of economic activity, will be released on Monday. Pending Home Sales will come out on Wednesday. Second quarter GDP, the broadest measure of economic activity, will be released on Thursday.