While last week seemed like the market was hyper focused on inflation, this week the market responded to growth fears in the U.S. and in Europe. The 10-year got as low as 3.0016% before coming back. There is a pretty good trading range now in 3-3.25%, at least until one of those levels is breached. It wouldn't be a surprise if the 10-year moves above one of those levels. Best to be careful out there as this is a volatile market.
Initial Jobless Claims
Initial Jobless Claims for the week ending on June 18th came in at 229k, slightly above market expectations of 226k. Continuing Claims for the week ending June 11th was at 1.315m, which was slightly below market expectations of 1.32m. The four-week moving average of initial jobless claims is at 223,500, which is the highest level since late January.
Existing Home Sales
Existing Home Sales slowed by -3.4% to a 5.41mln annualized pace in May from a prior 5.6mln unit pace, this according to the National Association of Realtors. This is now the lowest reading since June 2020, and looking YoY, sales were -8.6% lower than in May 2021. As we know, rising rates, home price appreciation, and continued low supply have continued to have their affects throughout the housing data, especially on affordability. There were 1.16mln homes for sale at the end of May, an increase of +12.6% MoM, but still down by -4.1% YoY. At the current sales pace, that represents a 2.6-month supply. Looking at prices, the median price of a home sold in May was $407,600, which is an increase of +14.8% from May 2021. This is also the highest price on record since tracking began back in the 80s. Existing homes sold in May stayed on the market an average of 16 days, also the lowest on record. All-cash sales were at 25%, while investors made up 16% of all transactions, and first-time homebuyers made up only 27% of all transactions. According to the NAR, "Further sales declines should be expected in the upcoming months given housing affordability challenges from the sharp rise in mortgage rates this year. Nonetheless, homes priced appropriately are selling quickly and inventory levels still need to rise substantially -- almost doubling -- to cool home price appreciation and provide more options."
Philly Fed Index
The Philly Fed Nonmanufacturing Index showed general activity improving to 24.7 in June from 22.8 back in May. It was reported that more than 46% of the firms responded that they had business activity expansion in June. New orders also rose sharply on the month, adding 12 points to 15.5. The sales/revenue index also showed improvement as it grew 18 points to 26.2. In addition, roughly 33% of businesses also reported an overall increase in both full employment and part-time employment.
MBA Mortgage Applications
The MBA weekly mortgage applications index increased by +4.2% for the week ending June 17th. Purchase applications increased by +8.0% but were -10.0% lower than the same week last year. Refinance applications decreased by -3.0% and were -77.0% lower vs. the same week a year ago. "Mortgage rates continued to surge last week, with the 30-year fixed mortgage rate jumping 33 basis points to 5.98 percent – the highest since November 2008 and the largest single-week increase since 2009. All other loan types also increased by at least 20 basis points, influenced by the Federal Reserve's 75-basis-point rate hike and commentary that more are coming to slow inflation," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "Mortgage rates are now almost double what they were a year ago, leading to a 77 percent drop in refinance volume over the past 12 months." Added Kan, "Purchase applications increased for the second straight week – driven mainly by conventional applications – and the ARM share of applications jumped back to over 10 percent. However, purchase activity was still 10 percent lower than a year ago, as inventory shortages and higher mortgage rates are dampening demand. The average loan size, at just over $420,000, is well below its $460,000 peak earlier this year and is potentially a sign that home price-growth is moderating."