Tight Inventory, Home Builder Confidence, and Economic Indicators

Welcome to our comprehensive review of the housing market and key economic indicators for the week of June 19, 2023. In this update, we analyze recent data and trends to provide you with valuable insights into the real estate landscape and the broader economy. Throughout the week, there were notable developments in existing home sales, home builder confidence, home construction, jobless claims, and recession signals. Let's delve into the headlines:

Existing Home Sales Edge Higher Even with Tight Inventory

The National Association of REALTORS® (NAR) reported a 0.2% increase in existing home sales from April to May, reaching a 4.30-million-unit annualized pace. However, compared to May of the previous year, sales were 20.4% lower. The tight inventory of homes played a significant role in the pace of sales, with supply levels roughly half of what they were in 2019. Despite this challenge, buyer demand remains strong, as correctly priced homes are selling quickly.

Home Builder Confidence Continues to Rise

The National Association of Home Builders (NAHB) Housing Market Index climbed five points to 55 in June, marking the sixth consecutive month of increased builder confidence. All three components of the index, including current sales conditions, sales expectations for the next six months, and buyer traffic, posted gains. The optimism among home builders is driven by factors such as the lack of existing home inventory, improving supply chains, and solid buyer demand.

Home Construction Surged in May

Housing Starts experienced a significant surge of 21.7% from April to May, indicating an increase in new home construction. Building Permits, which serve as a future supply indicator, rose 5.2% for the month. Although single-family starts and permits have risen since the beginning of the year, they remain lower than the levels seen a year ago. The housing sector continues to face undersupply, and the demand for single-family homes remains high.

New Trend Reached in Jobless Claims?

Unemployment Claims remained elevated, with 264,000 Initial Jobless Claims reported in the latest week. Continuing Claims slightly declined to 1.759 million. The sustained levels of initial and continuing claims indicate a trend rather than an anomaly. The labor market continues to present challenges for individuals seeking new employment opportunities.

Recession Signals Flashing

The Conference Board's Leading Economic Index (LEI) declined by 0.7% in May, marking the fourteenth consecutive month of contraction. This decline suggests weaker economic activity ahead. Furthermore, economic conditions overseas show signs of stalling, with countries like Japan, Australia, the Eurozone, and the United Kingdom experiencing slowdowns or contraction.

Outlook for This Week's Mortgage Rates

As we look ahead to the coming week, it's important to consider the outlook for mortgage rates. While various factors influence mortgage rate movements, including economic indicators and market conditions, here is a brief outlook:

Expectations: Mortgage rates are currently at historically low levels. Considering the recent economic developments, there is a possibility of slight upward pressure on rates in the near term.

Key Factors to Monitor: Pay attention to upcoming labor market data, including employment reports, to gauge job growth and the unemployment rate. Additionally, keep an eye on inflation figures, such as the Consumer Price Index (CPI), which can impact mortgage rates.
Market Conditions and Investor Sentiment: Mortgage rates are influenced by market conditions and investor sentiment. Any significant changes in market dynamics or investor confidence can affect mortgage rates.

For additional insights and information on the housing market and economic indicators, refer to the following sources: