Market Commentary. Home Prices Continue to Rise in Metro Areas. Mortgage rates drifted slightly downward last week as markets digested inflationary data and dealt with a little international financial drama. While we’ve seen an occasional flare, the latest data is showing that inflationary pressures are staying right in line with the Fed’s speed limit. This means that the Fed continues to have ample flexibility to react to overall economic trends. If we continue to see the economy growing around its current rate, the odds will remain very high that the Fed will up its interest rates in December. Likewise, should the economy not produce as the Fed is predicting, the Fed will have the flexibility to leave rates untouched for the rest of the year. We did see an uptick in cash flowing into Treasuries follow revelations that Turkey may be headed for dire financial troubles.
This week is likely to see rates mostly level or declining slightly. However, an unexpected increase in Retail Sales could help goose rates slightly higher for the week. That would be enhanced if we also get an Industrial Production reading that tops its solid 0.6% increase from last month.
Home Prices Continue to Rise in Metro Areas
According to the National Association of Realtors®, the national median home price in the second quarter of 2018 was $269,000, which is up by 5.3% on a year-over-year basis. However, existing home sales have fallen slightly by 1.7% due to the lack of home inventory on the market.
Lawrence Yun, NAR chief economist stated that, “The ongoing supply crunch affecting much of the country worsened for most of the second quarter, as the growing number of interested buyers in many markets overwhelmed what was already a meager level of available listings. With not enough homes for sale, multiple bids caused prices to rise briskly and further out of the reach of some prospective buyers.”
Read more: https://www.nar.realtor/newsroom/metro-home-prices-climb-to-new-all-time-high-rise-53-percent-in-second-quarter
Home Appreciates from $61K to $3 Million?
Here’s the story of a lovely lady. Who was bringing up three very lovely girls… If you recognize that tune, then you might understand how a house could appreciate from $61K at its last sale in 1973 to an estimated sale of near $3 million in recent days. HGTV has announced that it has acquired the second most photographed home in the USA, behind the White House. No news yet on their plans for the home, but if they launch a show about the home, it’s likely to be a hit!
This Week’s Top Economic Reports and Events
With Consumer Credit slowing last month, a drop to flat or below might not surprise too much but would put some downward pressure on rates.
An unexpected decline would be the start of a see-saw pattern for IP and could very easily generate additional downward pressure on rates.
While some have been expressing concerns about housing, builders continue to start new homes, and expectations are for even more to come.
Weekly Jobless Claims
The 4-week trend continues moving toward 210K, and another under-expectations reading could bring us closer, likely pushing rates upward.
Leading Economic Indicators
For many years, the LEI has been signaling that we are in a slow, solid growth pattern. Another 0.5% will reinforce that and help hold rates flat.