After reaching the highest levels in months last week, mortgage rates ended this week a little lower. Weaker than expected housing reports and tame inflation data helped support the decline in rates.
Home sales bounced back from the shutdown of much of the economy last spring far more quickly than expected and have remained at very high levels for many months. The pace slowed a bit in February, however, due to higher mortgage rates and severe weather in many regions. Existing home sales fell 7% from January, a larger decline than expected, but still were 9% higher than a year ago.
The median existing-home price was 16% higher than last year at this time, at a new record for the month of February of $313,000. Inventory levels were down 30% from a year ago to the lowest since 1982. The number of homes for sale was at just a 2-month supply nationally, well below the 6-month supply which is considered a healthy balance between buyers and sellers.
The reduced economic activity resulting from the pandemic caused a significant decline in inflation last year, which was one of the factors responsible for record low mortgage rates. With the vaccine rollout moving forward and the economy reopening, investors are now concerned that inflation may be heading higher. The latest data revealed no signs of this so far, however. In February, the core PCE price index was just 1.4% higher than a year ago, down from an annual rate of increase of 1.5% last month, and well below the Fed’s stated target level of 2.0%.
The Department of Labor releases the total number of new claims for unemployment insurance each week, and the latest reading was 684,000, 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.
Looking ahead, investors will continue watching Covid case counts and vaccine distribution. Beyond that, the ISM national manufacturing index will come out on Thursday. The key monthly Employment report will be released on Friday, and these figures on the number of jobs, the unemployment rate, and wage inflation are generally the most highly anticipated economic data of the month.
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Raleigh Mortgage Group, Inc.
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