During a light week for economic data, investors remained focused on the troubling spread of the coronavirus in many regions. Daily volatility in mortgage markets was small, and rates held relatively steady near record low levels.
The most significant economic data released this week came from the housing sector, and it again revealed that the recovery has been much faster than anticipated. In June, sales of previously owned (existing) homes, which make up about 90% of the market, unexpectedly jumped a record 21% from May but still were lower than a year ago. National median existing-home prices were up 4% from a year ago.
Inventory levels were down 18% from a year ago and remained the primary trouble spot. The number of homes for sale was at just a 4.0-month supply nationally, well below the 6.0-month supply which is considered a healthy balance between buyers and sellers.
June new home sales, which account for the remaining 10% of the market, also far exceeded the consensus forecast. They increased 14% from May and were 7% higher than a year ago. Unlike existing home sales, which are based on closings, new home sales measure contracts signed during the month.
In March, the government initiated an enhanced unemployment benefits program through July 31 which increased weekly payments by $600 and expanded the number of people who qualified. With millions of Americans still out of work due to the pandemic, there is widespread support for additional aid. However, lawmakers have been unable to agree on the details of a new program, and it’s not yet clear if one will be implemented by the end of the month.
Looking ahead, investors will continue watching for news about medical advances, government stimulus programs, and plans for reopening the economy. Beyond that, the next Fed meeting will take place on Wednesday, and investors will be looking for guidance about the expected levels of monetary stimulus. Second quarter gross domestic product (GDP), the broadest measure of economic growth, will be released on Thursday, and early estimates are for a massive decline in the range of 30% to 40% due to the partial shutdown of the economy. The core PCE price index, the inflation indicator favored by the Fed, will come out on Friday.
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