Market Forecast: New Home Sales, Existing Home Sales, and FHFA House Price Index
Last week, the Federal Open Market Committee (FOMC) voted to raise the benchmark interest rate to a level of 1.00% - 1.25%, the second rate hike of 2017. This week, the final numbers from the spring selling season will be available including existing home sales, new home sales, and the Federal Housing Finance Agency (FHFA) house price index.
The majority of real estate transactions are existing home sales or resales. An existing home sale is any sale of a previously constructed residential unit closed in the month. In April, existing home sales declined 2.3% month-over-month, but were up 1.6% year-over-year to a level of 5.570 million.
The FHFA house price index tracks any change in the value of homes financed through conventional mortgages backed by Fannie Mae and Freddie Mac. The FHFA house price index does not count homes financed through government-backed mortgages like FHA or VA. The data, which lags by one month, showed a 0.6% month-over-month appreciation in April and a 6.2% year-over-year increase. Home prices have been on a steady increase this year.
New home sales track the number of newly constructed homes with a committed sale during the month. New home sales trigger economic momentum like construction job creation and the purchase of construction materials. In April, new home sales dropped from a nine-year high, down 1.5% month-over-month, but were up 0.5% year-over-year.
In the statement following the meeting, the FOMC acknowledged that inflation “has declined recently” but cited that household spending has “picked up in recent months.” The dot plot showed that the FOMC is still forecasting a third rate hike this year, and three in 2018, despite slowed inflation.
Sources: Bloomberg, CNBC, MarketWatch, Mortgage News Daily