Varied Economic Data
It was a relatively light week for economic data, and the results were mixed. Consumer spending fell short, but the services sector excelled. As a result, mortgage rates ended last week with little change. Higher prices and credit card rates appear to finally be slowing the spending of consumers. In May, retail sales rose just 0.1% from April, below the consensus forecast, and the results for the prior month received a significant downward revision as well. Many categories fell short of expectations in May, and particularly large monthly declines were seen in restaurants and furniture stores.
Inflation Anticipation
An economic report which has just recently come across the radar of investors and gained prominence revealed surprising strength. The Global Services PMI, measuring the strength of the services sectors in over 40 countries, jumped to 55.1, far above the consensus forecast, and the highest level since April 2022. This strong report increased investor concerns about inflation.
Housing News
In the housing sector, sales of existing homes in May fell 1% from April, very close to the consensus forecast, and were a little lower than last year at this time. The median existing-home price of $419,300 was up 6% from last year at this time, at the highest price ever recorded. Inventory levels remain stuck near historic lows, standing at just a 3.7-month supply nationally, far below the 6-month supply typical in a balanced market. Looking at these figures from a different perspective, however, inventories were 19% higher than a year ago, at the highest level in four years. Of note, according to the National Association of Realtors, the average mortgage payment is now roughly 50% higher than it was five years ago.
Disappointing Home-Building Data
Although additional inventory is still desperately needed in many regions, the latest home-building data was disappointing. In May, overall housing starts fell to the lowest level since June 2020. Single-family housing starts dropped 5% from April, more than expected, and were 2% lower than a year ago. Multi-family units were a shocking 52% lower than last year at this time. Single-family building permits, a leading indicator of future construction, also declined more than forecasted. In addition, a separate survey of home builder sentiment on housing market conditions from the NAHB unexpectedly dropped for the first time since December.
Mortgage Rates for the week of 6-24-2024