05/29/2024
Quiet Week Means Rates Hold Firm
Avg. 30-year fixed rate:
Week of 5/24: ±0.00
Week of 5/17: -0.13
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Stocks (Weekly)
DOW: 39,671 -198
NASDAQ: 16,801 +103
After a welcomed stretch of declines, mortgage interest rates held firm last week, due largely to an absence of major economic reports. By week’s end, the average lender was quoting 7.09% for top-tier conventional 30-year fixed scenarios.
The most important rate-related news concerned the 10-year Treasury yield, which increased one basis point to 4.42% following the release of the latest Federal Reserve meeting minutes. The release showed that Fed officials have grown more concerned about the lack of progress on inflation. The minutes showed a willingness from “various participants” to increase its benchmark rate if inflation does not keep moving toward the Fed’s stated 2% goal.
Interest rates are tied to the 10-year Treasury yield. When the yield goes up or down, rates typically follow suite.
Thursday’s New Residential Sales report revealed that sales of new single-family homes fell more than expected in April. The report was another indication that the housing market is losing momentum in the second quarter of this year.
New home sales—which account for more than 10% of national home sales—decreased 4.7% to a seasonally adjusted annual rate of 634,000 units. Meanwhile, the sales pace for March was revised lower to 665,000 units from the previously reported 693,000 units. Sales plummeted 20.9% in the Northeast, 7.3% in the West, and 4.8% in the South. Midwest sales climbed 10%.
On an annual basis, sales declined 7.7%. The median new home price hit $433,500, a 3.9% bump from the same time last year. In terms of inventory, it would take 9.1 months at April’s sales pace to clear the supply of houses on the market, up from 8.5 months in March.
Elevated interest rates continue to contribute to sluggish sales figures. This was the key takeaway from Wednesday’s Existing Home Sales report, which showed that sales were down 1.9% for the month and the year.
“When we see these mortgage rates, which is a 300-basis point increase from pre-COVID pace, we are in a new territory as to how the lock-in effect will restrain home sales,” said Lawrence Yun, chief economist for the National Association of REALTORS®.
The median sale price of an existing home was $407,600, a 5.7% uptick from March 2023 and a new record for April. “Home prices reaching a record high for the month of April is very good news for homeowners,” said Yun. “However, the pace of price increases should taper off since more housing inventory is becoming available.”
In fact, inventory climbed to a 3.5-month supply, a level that is considered a seller’s market. In another piece of good news, the share of first-time buyers hit 33% in April, up from March’s 32% and sizably better than February’s 26%.
Here are other key numbers from the report:
Total sales—completed transactions that include single-family homes, townhomes, condominiums, and co-ops—were at an annual pace of 4.14 million transactions.
Properties remained on the market for an average of 26 days in April, a decrease from 33 days in March. However, in April 2023, that figure was only 22 days.
The jump in median sales price marked the 10th consecutive month of year-over-year increases.
All four geographic regions experienced annual price increases with the West leading the way at $629,600 (up 9.3% annually).
