Ever feel like the housing market is a roller coaster? Well, last week was no different. We had some interesting developments that might make you scratch your head and say, “Really?” So, let’s break it down.
Inflation Readings Keep Fed on Track for September Rate Cut
First up, let’s talk inflation. It sounds like a big, scary word, but basically, it’s all about how much prices are going up over time. June’s Personal Consumption Expenditures (PCE) showed only a tiny rise of 0.1% from May. That’s good news because it means prices aren’t skyrocketing. The Core PCE, which is what the Fed (think of them as the financial traffic cops) really pays attention to, stayed steady at 2.6%—the lowest in three years!
So, why should you care? Well, the Fed has been raising interest rates like crazy to try and keep inflation in check. Imagine trying to slow down a speeding car by tapping the brakes. They’ve done this eleven times between March 2022 and July 2023. Now, with inflation showing signs of calming down, there’s a good chance the Fed might cut rates in September. Lower rates could mean cheaper loans and maybe even a more affordable mortgage. Fingers crossed!
Existing Home Sales Decline, Inventory Ticks Higher
Now, let’s move on to home sales. The National Association of REALTORS® (NAR) reported that existing home sales dropped for the fourth month in a row in June, down 5.4% from both May and a year ago. This probably reflects people house hunting back in April and May when mortgage rates were above 7%. Ouch, right?
But here’s the kicker—despite fewer sales, homes were flying off the market faster. The average home sold in just 22 days in June, down from 24 in May. Plus, nearly a third of homes sold above the asking price. So, even with high rates, there’s still plenty of demand.
On the flip side, there’s a bit more inventory available— up slightly from May and significantly from last year. It’s still below what we need, but hey, baby steps, right?
New Home Sales Hit 7-Month Low
And what about new homes? Sales of new homes dropped 0.6% from May to June, hitting the lowest point since November. Signed contracts were also down 7.4% from last June.
But why the drop? Even with fewer sales, people are still looking at new homes because there aren’t enough existing homes available. The problem is, of the new homes for sale, only about 30% were move-in ready. The rest were either under construction or not even started yet. We need more finished homes to meet the demand.
Second Quarter GDP Stronger Than Forecasted
Here’s some good news—the economy grew faster than expected in the second quarter! The Gross Domestic Product (GDP) rose by 2.8%, beating the 2% estimate and doubling the growth from the first quarter. This surprise boost came from strong consumer spending and inventory build-up.
What does this mean for us? Well, a stronger economy can lead to more jobs and higher wages. However, this data could change when the final readings are released in August and September. So, let’s keep an eye on it.
Jobless Claims Improve but Remain Elevated
Finally, let’s talk about jobs. The number of people filing for unemployment benefits dropped recently, but jobless claims are still high compared to earlier this year. Initial Claims nationwide, were at 235,000, and 1.851 million people are continuing to receive benefits after filing their initial claim.
This rise in jobless claims shows that layoffs have picked up while hiring has slowed. It’s a bit of a mixed bag—less job security but more opportunities for those looking to switch careers or find new jobs.
In A Nutshell . . .
So, what’s the takeaway from all this? The housing and mortgage markets are still in flux, with some promising signs and some areas of concern. It’s all about riding the wave and staying informed. I will keep chatting about these changes and how they might affect us personally. After all, these numbers and trends are more than just data—they’re about our homes, our finances, and our futures. I’m curious, what are your thoughts? Are you feeling more hopeful or cautious about the housing market these days?