Market Matters
Seems like we are finding a decent trading range this week, with the 10-year consolidating nicely around 3%. Next week, the Fed will have their FOMC meeting on Tuesday and Wednesday, with the FOMC Statement and Press Conference Wednesday afternoon. The market is expecting 75 bps and we don't see a reason to expect anything other than that. The ECB raised rates by 50 bps on Thursday this week, which was unexpected, and the market rallied on the higher rate hike which was surprising. The markets are worried about growth fears, so, it will be interesting to see if the Fed continues its hawkish stance and how the market responds to it.
Initial Jobless Claims
This week's release of jobless claims revealed that initial jobless claims continue to climb upwards, the consensus was at 240k with a previous reading of 244k, but today's number is higher at 251k. Continued claims started to climb as well, after plateauing at historically low numbers since March - now at 1.384mln, while consensus was at 1.340mln and last week's reading was at 1.333mln (revised from 1.331mln). This reading is the highest since November 2021; back then initial claims were at 265k. The four-week moving average for claims is now 236k, while for continued claims, it is 1.353mln.
Existing Home Sales
Existing Home Sales in June fell by -5.4% to 5.12mln annualized units, down from a prior 5.41mln. Looking YoY, existing home sales are down -14.2% from June 2021. The number of homes available for sale rose from 1.15mln to 1.26mln, which at the current sales pace, puts the month's supply at 3.0 from a prior 2.6. This is now the highest level of inventory since August 2020. Last June, for context, the number of homes available for sale was at 1.23mln. For June 2022, Price growth was still higher, however, with the median up +1.9% on the month, while the YoY rate dropped from +15.0% to +13.4%. Properties were on the market for just 14 days in June, a low going back to 2011. Broken out by region, the West was down -11%, the South down -6.2%, the Midwest down -1.6%, with the Northeast flat for the second month in a row. The National Association of Realtors noted that, "Finally, more homes are on the market. Interestingly, the record-low pace of days on the market implies a fuzzier picture of home prices. Homes priced right are selling very quickly, but homes priced too high deter prospective buyers."
Housing Starts
Housing Starts in June dropped -2.0% to 1.559mln units, with May's numbers revised from 1.549mln to 1.591mln. Looking YoY, headline starts are down -6.3%. Single-family starts for June dropped by -8.1%, while multi-family starts gained +15.0% on the month. By region, the Northeast added +10.6%, with the West up +3.7%, the South down -4.8%, and the Midwest down -7.7%. June's building permits dropped by -.6%, however, are still up +1.4% when looking YoY. Single-family permits for June declined by -8.0%, while multi-family permits rose by +13.1%. Broken out by region, the Northeast posted the largest gain once again, up +18.0% on the month, followed then by the West up +5.8%, the South losing -2.1%, and the Midwest down -15.7%. Finally, housing completions also were on the weaker side for June, down -4.6%, even though they are still +4.6% above the June 2021 level. Overall, single-family unit starts and permits have fallen sharply over the past few months, and both are now at their lowest levels since June 2020. However, strength in multi-family building has offset some of that weakness. Financing costs remain a headwind for multi-family building, but market rents are up around +15% annually, and rental vacancies remain very low, all of which is creating an incentive to build more units.
Weekly Mortgage Applications
The MBA weekly mortgage application index declined by -1.7% for the week ending July 8th. Purchase applications fell by -4.0% and were -18.0% lower than the same week last year. Refinance applications increased by +2.0% but were -80.0% lower vs. the same week a year ago. "Mortgage rates were mostly unchanged, but applications declined for the second straight week. Purchase applications for both conventional and government loans continue to be weaker due to the combination of much higher mortgage rates and the worsening economic outlook," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "After reaching a record $460,000 in March 2022, the average purchase loan size was $415,000 last week, pulled lower by the potential moderation of home-price growth and weaker purchase activity at the upper end of the market." Added Kan, "Refinance applications increased slightly last week, driven by an uptick in conventional and FHA refinances. The overall refinance index remained 5 percent below the average level reported in June. With the 30-year fixed rate 265 basis points higher than a year ago, refinance applications are expected to remain depressed."
