Market Recap: No Rate Hike, Pending Home Sales Jump, Case-Shiller Home Price Index is Up
The Federal Open Market Committee (FOMC) met Tuesday and Wednesday of this week, and as expected, did not make any interest rate moves. Most economists are predicting two additional rate hikes this year, one in September, then another in December. The National Association of Realtors’ (NAR) pending home sales index surged after several months of tepid data. The S&P CoreLogic Case-Shiller home price index continues to appreciate.
The pending home sales index details changes in the number of homes that are under contract but not yet closed. Typically, it takes four-to-six weeks for a contract to close. In June, pending home sales increased 0.9% month-over-month, but were down 2.5% year-over-year. All regions increased, led by the Northeast, up 1.4% month-over-month, and the South, up 1.1% month-over-month. The West increased 0.7% month-over-month and the Midwest increased 0.5% month-over-month. NAR chief economist, Lawrence Yun, commented, “after two straight months of pending sales declines, home shoppers in a majority of markets had a little more success finding a home to buy last month.”
The Case-Shiller home price index tracks changes in the value of homes involved in two or more sales transactions across twenty major metropolitan areas around the country. In May, home prices increased 6.4% year-over-year and 0.4% month-over-month. Although prices continue to go up, acceleration has slowed. May’s 6.4% annual increase is unchanged from April’s 6.4% annual increase. Three cities posted double-digit annual gains, Las Vegas, Seattle, and San Francisco. The Wall Street Journal contributor Laura Kusisto explains, “rising mortgage rates have contributed to a slowdown in the pace of home sales in recent months and may also be putting slight downward pressure on prices.”
Following their Tuesday and Wednesday meeting, the FOMC voted to leave the benchmark interest rate unchanged. In their statement, the FOMC commented positively on the strength of the labor market and the low unemployment rate. From the statement, “the Committee decided to maintain the target range for the federal funds rate at 1.75% to 2%. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2% inflation.”
With interest rates expected to continue rising, mortgage rates will likely react also. Even with more rate hikes on the horizon, mortgage rates are low by historic standards. The bigger challenge today’s home buyers are facing is available for-sale inventory. With pending home sales turning around this month, it may be a sign of the construction industry starting to replenish housing inventory.
Sources: Bloomberg, MarketWatch, MarketWatch, Mortgage News Daily, The Wall Street Journal