It was a quiet week for mortgage markets. Mixed economic data and a proposed tax increase caused little reaction, and mortgage rates ended the week nearly unchanged.
Existing home sales, which make up about 90% of the market, bounced back from the shutdown of much of the economy last spring far more quickly than expected and have remained at very high levels. The pace slowed a bit in February and March, however, due to a lack of inventory in many regions, higher mortgage rates, and severe weather in some areas.
In March, existing home sales fell 4% from February, but still were 12% higher than a year ago. The median existing-home price was 17% higher than last year at this time, at a new record of $329,100. Inventory levels were down 28% from a year ago and remained near the lowest since 1982. The number of homes for sale was at just a 2.1-month supply nationally, well below the 6-month supply which is considered a healthy balance between buyers and sellers.
By contrast, new home sales, which account for the remaining 10% of the market, posted enormous gains. In March, new home sales jumped 21% from February to the highest level since 2006. In general, the pace of both new and existing sales is being dictated by the supply of homes available each month.
The Department of Labor releases the total number of new claims for unemployment insurance each week, and the latest reading was 547,000, the lowest level in over a year. This was down significantly from the inflated figures seen during the early months of the pandemic, but still well above the readings around 250,000 which were typical during 2019. As the economy reopens, jobless claims should continue to decline.
On Thursday, the Biden administration announced a proposed increase in the capital gains tax rate for high earning individuals. Since some economists forecast that this could slow economic growth, investors viewed the news as slightly positive for mortgage rates.
Looking ahead, investors will continue watching Covid case counts and vaccine distribution. Beyond that, the next Fed meeting will take place on Wednesday. No change in the federal funds rate is expected, and investors will be looking for guidance on the pace of future bond purchases. First quarter GDP, the broadest measure of economic activity, will be released on Thursday. The core PCE price index, the inflation indicator favored by the Fed, will come out on Friday.
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