Economic Data Recap + What’s in Store This Week

This week was a busy one for housing data.  We saw pending home sales data, Case Shiller home prices, inventory data from realtor.com®, the Fed meeting and announcement plus July jobs data. Next week is much quieter with mortgage rate data from Freddie Mac being the only major housing-related economic update.  Here’s what we learned and what we can expect.

Here’s what we learned this week:

Pending Home Sales

Pending home sales data on Monday showed that while signed contracts increased 0.9 percent from May, they slipped 2.5 percent from last year, marking the sixth month of declines from a year ago. The limited number of homes for sale has continued to plague the market, frustrating buyers and holding back home sales.  The pending home sales index is important because contract signings are a leading indicator of home sales. Weakness or strength here tends to be reflected in sales trends in the next one to two months.

The increase in May pending home sales could have stemmed in part from the increase in June inventory, which was up 0.5 percent from a year ago—a very small yet important increase, since it marks the first move up in three years.  Drilling down to the market level, inventory data from realtor.com® showed several large metro areas saw big jumps in active listings, including Portland, Oregon (24 percent); Providence, Rhode Island (20 percent); Seattle, Washington (19 percent); Nashville, Tennessee (17 percent); and San Jose, California (15 percent).

Find the full Pending Home Sales data report here.

Case Shiller Home Prices

Case Shiller home price May data was out on Tuesday and showed continued price increases for repeat sales closed in March, April, and May. Case Shiller data is likely to show that home prices grew 6.1 to 6.5 percent from a year ago, depending on whether one is looking at the 10-City Composite (+6.1%), 20-City Composite (+6.5%), or National index (+6.4%). Metro areas in the West—namely Seattle (+13.6%), Las Vegas (+12.6%), and San Francisco (+10.9%)—topped the list of fastest growing areas.

A strong economy is likely to continue to keep home buyers in the market and limited inventory will keep home prices climbing.  Asking prices of for-sale homes increased 8 percent in the months corresponding to Case Shiller data and have maintained that pace in recent months according to realtor.com® data, suggesting that in most markets home-sellers believe buyers are willing to pay up. Sales prices and volumes will ultimately reveal whether sellers are correct. In the first half of the year, survey data indicate that only 28 percent of successful home buyers paid less than asking price, but at the same time, existing home sales have slowed, suggesting that some buyers are watching instead of diving in.

Find the full Case Shiller home price report here: https://us.spindices.com/index-family/real-estate/sp-corelogic-case-shiller.

Realtor.com® July Inventory Data

Also on Tuesday, July inventory data from realtor.com® gave us a first-look at the mid-summer real estate market.  While inventory continues to decline nationwide—moving down 4 percent from a year ago—and in many markets, some markets are seeing inventory growth. In fact, 16 of the largest 45 markets saw a gain in the number of homes for sale this year versus last year. This growth in the number of homes for sale is concentrated in high-priced, competitive markets, and often at the pricier end of these markets.  Although signs of an inventory turnaround are encouraging, whether they mean good news for buyers remains to be seen. These areas are seeing more new listings and some construction growth, but high prices and fast-selling homes are causing some buyer hesitation which is reflected in fewer home sales.

Find the full July Housing Market Inventory report here.

The Federal Reserve

On Wednesday, the Federal Reserve concluded one of its regular open market committee meetings.  Each meeting is a scheduled opportunity for the open market committee to review and, if needed, adjust the course of monetary policy.  After raising the target range for the federal funds rate to 1.75 to 2 percent in June, the committee made no change to rates this week.

It did adjust the language in its statement, strengthening its tone on economic growth and achievement of its inflation objective. The August statement noted that “economic activity has been rising at a strong rate” versus “solid” in June (emphasis added).  It also noted that inflation “remains near 2 percent,” after noting in June that it had “moved close to” the target.

While the language continued to state that, “The committee expects that further gradual increases” will be appropriate policy, the adjustments to the statement noted above have increased the likelihood of an increase in rates at the September and December meetings, but this was the path most widely expected before this meeting.  As a result, there was no major response from rates.

Find the Federal Open Market Committee meeting calendar and statements here.

Freddie Mac Mortgage Rates

Freddie Mac data came out on Thursday and showed strong economic growth as shown in recent GDP data and a potentially averted trade war pushed rates up to 4.60 this week. While rising rates mean that the vast majority of would-be home buyers pay more to buy a home, they reflect a growing economy that is likely to continue creating jobs and income and thus more home buyers in the future.

Find the full Freddie Mac Primary Mortgage Market Survey here.

Jobs Report

To cap off the big data week, the jobs report released today showed that the number of workers continues to rise and that the unemployment rate continues to hover near historic lows. In fact, 157,000 workers were added to payrolls in July and revisions to past data added another 59,000 more jobs than previously reported. Looking to income growth, we see no major change. Today’s job report showed 2.7 percent income growth, roughly the same amount of extra money in shoppers’ pockets that we’ve seen since December. While the extra income will help offset the pinch of higher mortgage rates, prices are still growing much faster. The median U.S. home listing price was up 9 percent in July.

Job growth is generally a positive factor for the housing market, but with few affordable homes for many buyers, what’s most needed now is income growth and new construction. One sign that new construction is likely to keep growing, 19,000 new construction jobs were added in July bringing the 12-month total to 308,000 new construction jobs.

Find for the full Employment Situation Summary here.

Here’s what we expect next week:

Freddie Mac Mortgage Rates

Freddie Mac data comes out on Thursday for mortgage rates.  Without much additional information to inform movement between now and Thursday, rates are likely to stay the course at current levels which are roughly 70 basis points higher than one year ago. Some steadiness in rates would be good news for home shoppers still in the market after an extraordinarily competitive spring and summer buying season. Especially as inventory has started to pick up, at least in certain high-priced markets. 

Watch for the full Freddie Mac Primary Mortgage Market Survey here.


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