By the middle of last week the good news about the real estate market began coming in with the arrival existing home sales data, and a drop in mortgage rates for fixed rate loans. The National Association of Realtors® reported higher sales of pre-owned homes and the FHFA reported that home price growth associated with mortgages held or backed by Fannie Mae and Freddie Mac held steady in May.
According to the National Association of Realtors®, June sales of existing homes reached their highest level since February 2007. Sales of previously owned homes reached a seasonally-adjusted annual rate of 5.47 million against expectations of 5.42 million homes and May’s reading of 5.32 million pre-owned homes sold.
That’s good news for the summer shopping season, but sales of existing homes remain nearly 24 percent below at pre-recession peak. Pinned up demand, new household formations, improving labor markets and home buyer concerns over rising mortgage rates appear to be driving factors and contributed to recent reading for existing home sales.
On the opposite side of the spectrum is New Home Sales. Home Builders remain optimistic even though New Home Sales fell in June to a seven-month low and May’s sales were revised sharply down. New home sales dropped 6.8 percent to a seasonally adjusted annual rate of 482,000 units, the lowest level since last November, the Commerce Department said. May’s sales pace was cut to 517,000 units from the previously reported 546,000 units.
FHFA, the federal agency that oversees Fannie Mae and Freddie Mac, reported that home prices associated with sales of homes financed with loans owned or backed by Fannie and Freddie inched up by 0.40 percent month-over-month in May and held steady with April’s revised reading of 0.40 percent. FHFA home prices rose by 5.70 percent year-over-year in May.
Freddie Mac reported that average rates for 30 and 15-year mortgages fell while the average rate for a 5/1 adjustable rate mortgage ticked upward by one basis point. The average rate for a 30-year fixed rate mortgage fell by five basis points to 4.04 percent; the average rate for a 15-year fixed rate mortgage fell by four basis points to 3.21 percent. The rate for a 5/1 adjustable rate rose by one basis point to 2.97 percent. Average discount points were unchanged at 0.60 percent, 0.60 percent and 0.50 percent respectively.
Weekly applications for unemployment benefits fell 26,000 to 255,000, the fewest since November 1973. If the data were adjusted for the growth of the U.S. population since then, last week’s figure would likely be an all-time low. Six years after a brutal recession that wiped out more than 8.5 million jobs, Americans are now enjoying a nearly unprecedented level of job security. Next to come should be wage increases, which is sorely needed.
Scheduled economic reports for this week include the Case-Shiller Home Price Index reports for May and the Commerce Department’s report on Pending Home Sales. The Federal Open Market Committee of the Federal Reserve has scheduled an announcement on Wednesday, and reports on Consumer Confidence and Consumer Sentiment will also be released this week, along with the weekly reports from Freddie Mac on mortgage interest rates and weekly jobless claims.
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