The last couple of weeks of December typically exhibit very light trading volume and limited investor reaction to economic news. This year was no exception, and mortgage rates remained near record low levels.
While rising case counts of the coronavirus have slowed economic activity in some areas of the economy such as consumer spending near the end of the year, one sector which has remained red hot is housing. In November, existing home sales were 26% higher than a year ago, near the best levels since 2006. The median existing-home price was 15% higher than a year ago, also close to record levels.
Inventory levels were down 22% from a year ago and remained the primary obstacle to even stronger sales activity. The number of homes for sale was at just a 2.3-month supply nationally, a record low and well below the 6.0-month supply which is considered a healthy balance between buyers and sellers.
The reduced economic activity resulting from the pandemic has caused a decline in inflation, which has been one of the factors responsible for record low mortgage rates. In November, the core PCE price index was just 1.4% higher than a year ago, the same annual rate of increase as last month. Core PCE is the inflation indicator favored by Fed officials, and their stated goal is to reach a level of 2.0%.
Last week, Congress passed a $900 billion Covid relief bill which will provide additional assistance to households, small businesses, and healthcare providers. The bill includes an extension of supplemental unemployment benefits of $300 per month and direct payments of $600 to qualifying individuals. Lawmakers continue to discuss whether to increase the amount of these payments.
Looking ahead, investors will continue watching Covid case counts and vaccine distribution, and the Georgia Senate election will take place on January 5. The ISM national manufacturing index will be released on January 5 and the ISM national services index on January 7. The monthly Employment report will be released on January 8, 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. Mortgage markets will close early on Thursday and will be closed on Friday for the New Year’s holiday.
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