Home Sales Slip – October 2019 Edition

A light batch of economic data caused little reaction this week, and Thursday’s European Central Bank meeting also had just a minor impact. As a result, mortgage rates ended the week nearly unchanged.

The most significant economic data released this week came from the housing sector. In September, sales of previously owned (existing) homes, which make up about 90% of the market, fell a little more than expected from August but still were 4% higher than a year ago. National median existing-home prices were up 6% from a year ago. Inventory levels remained the primary trouble spot, as the number of homes for sale was at just a 4.1-month supply nationally, well below the 6.0-month supply which is considered a healthy balance between buyers and sellers.

September new home sales, which account for the remaining 10% of the market, also fell a bit from August. Unlike existing home sales, which are based on actual closings, new home sales measure contracts signed during the month. The decline suggests that new home sales in September were more heavily affected by an increase in mortgage rates, which were almost 0.5% higher at their peak than at the beginning of the month. Despite the recent weakness, new home sales still were 16% higher than a year ago.

This week, investors were watching a couple of events in Europe as well, but neither had much effect on U.S. mortgage rates. As expected, the European Central Bank (ECB) kept benchmark rates unchanged at its meeting on Thursday, and comments from ECB President Draghi provided little reason for investors to alter their outlook for future policy. The latest proposed plan for the British exit from the European Union (Brexit) was rejected by the British Parliament over the weekend, and there is not enough time to attempt to reach a new deal before the scheduled departure date of October 31. British and EU officials now are negotiating another extension to the deadline.

Looking ahead, it will be a busy week. The next Fed meeting will take place on Wednesday, and investors expect a 25 basis point rate cut. The monthly Employment report will be released on Friday, and these figures on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month. Before that, third quarter GDP, the broadest measure of economic growth, will come out on Wednesday. The core PCE price index, the inflation indicator favored by the Fed, will be released on Thursday. In addition, news about Brexit, the impeachment inquiry, or the trade negotiations could influence mortgage rates.

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