Service Sectors Show Strength
Unexpected strength in the services sectors around the world was unfavorable for mortgage markets last week. The latest comments from Fed officials did not stray from the message at the last meeting. As a result, mortgage rates ended a little higher.
Inflation Concerns
An economic report which has just recently come across the radar of investors and gained prominence was the most influential data last week. The Global Services PMI, measuring the strength of the services sectors in over 40 countries, jumped to 54.8, far above the consensus forecast, and the highest level since May 2023. This strong report increased investor concerns about inflation, making it negative for mortgage rates.
Home Sales
In the housing sector, sales of existing homes in April fell 2% from March, slightly below the consensus forecast, and were a little lower than last year at this time. The median existing-home price of $407,600 was up 6% from last year at this time, at a record high for the month of April. Inventory levels remain stuck near historic lows, standing at just a 3.5-month supply nationally, far below the 6-month supply typical in a balanced market.
One interesting note is that both inventory levels and sales of homes priced over $1 million were up roughly 40% from last year at this time. Sales of new homes, which make up about 15% of the total market, fell much more than expected from March and were 8% lower than a year ago.
No Surprises From The Fed
The minutes from the May 1st Fed meeting released last Wednesday revealed no significant surprises. The consistent message continues to be that officials are in no hurry to cut interest rates. They prefer to wait for “greater confidence” that inflation will continue on a path down to their target level of 2.0%. Based on recent speeches, this suggests a minimum of three months of data indicating that the downward trend has resumed. Most investors now anticipate that the first rate cut will take place in September.
Mortgage Rates for the week of 5-28-2024