The past week yielded numerous reports for the housing market. Home price appreciation showed respectable growth, rising 0.4% in May following a 0.4% increase in April. Year-on-year, the FHFA reported that home prices appreciated by 5.7%, the best rate since April of last year.
New home sales for June displayed quite a bit of volatility, plunging 6.8% to a much lower-than-expected annual rate of 482,000 units, the lowest level since last November. Despite two straight months of declines, new home sales are actually up 18.1% compared to June of last year, leaving the housing market recovery intact. Another positive is the surge in the number of new homes on the market, up 3.4% in June to 215,000. This is the highest supply of new homes since May 2010.
Existing home sales numbers were very strong for the month of June, increasing by 3.2% to a higher-than-expected annual rate of 5.49 million, the best rate since February 2007. Year-on-year existing sales also displayed significant growth with an increase of 9.6%. The median home price for June was a record $236,400, a 3.3% increase from the previous month. First-time buyers, a group that has been depressed since 2008, continue to make up only 30% of total sales. More future involvement from first-time buyers could point to a significant increase in momentum for total home sales.
Jobless claims data shocked analysts when initial claims fell by 26,000 in the week ending July 18 to 255,000, a 42-year low! However, the 4-week average served to smooth out this volatility, decreasing only 4,000 to 278,500, a level that is little changed from the month-ago comparison. After some consideration, many Wall Street experts believe that the drop may be in part due to temporary auto company layoffs, as these companies typically shut down facilities in July to do some maintenance. Continuing claims for the July 11 week also fell, down 9,000 to a new multi-year low of 2.207 million. The 4-week average for continuing claims dropped by 10,000 to 2.254 million, and is also very little changed from the month-ago comparison.
Over the past week, rates have dropped across the board. Most loan programs saw only slight decreases of 1/8 percentage points or less, and some programs, such as the 30-year conventional, 15-year conventional, the 30-year jumbo, simply returned to the same rate levels seen two weeks prior. The largest rate decrease was seen in the 30-year conventional program, which dropped 1/8 percentage points to 4.000% (4.040% APR), and is trending slightly below the year-ago rate of 4.125% (4.182% APR). 30-year conventional mortgage rates, along with those in other loan programs, have displayed much back-and-forth movement over the past few weeks, as can be seen below:
Sean Becketti, chief economist with Freddie Mac, commented that conventional mortgage rates were likely driven down by the drop in U.S. Treasury yields, due to announcements that many blue chip companies’ earnings failed to meet expectations. He continued to discuss the present economy, noting, “Housing continues to be the bright spot in the economic recovery. Existing home sales beat market expectations coming in at a seasonally adjusted annual rate of 5.49 million homes. This is up 9.6 percent from a year ago and the fastest pace since 2007. Also, housing starts jumped 9.8 percent responding to strong demand in the multifamily market.”