Home sales at decade high
Home Sales at Decade High
The past week was a relatively light one for economic news, but daily volatility remained high. Uncertainty about the future of the European Union (EU) was favorable for U.S. mortgage rates. A week ago, mortgage rates were near the highest level of 2017. This week, mortgage rates recovered some ground and ended a little lower.
With elections coming up in several European countries, investors have begun to focus again on the future of the EU. The first major election will take place in France on April 23. Polls in France suggest that Marine Le Pen is a top contender, and her campaign has focused on the idea of leaving the EU and ending the use of the euro currency in France. A victory by Le Pen would create a great deal of uncertainty about the future of the EU, and this has caused investors to seek the relative safety of assets such as U.S. Treasuries and mortgage-backed securities (MBS). Added demand for MBS is good for U.S. mortgage rates.
January existing home sales increased 3% from December, beating the consensus, and reaching the highest level since February 2007. Concern for rising mortgage rates may have contributed to some of the improvement in January, but the readings over the last few months have been solid. Total inventory of existing homes for sale remained near record lows with a 3.6-month supply. Home builders appear ready to add to the supply of homes. In January, single-family housing starts and building permits were significantly higher than they were a year ago.
Looking ahead, the New Home Sales data will be released on Friday. Pending Home Sales and Durable Orders, an important indicator of economic activity, will come out on February 27. The Institute for Supply Management (ISM) Manufacturing Index and the core Personal Consumption Expenditures (PCE) Price Index, the inflation indicator favored by the Fed, will be released on February 28.
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