Written Buyer Agreement | Mortgage Intel

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Week of July 22, 2024 in Review

The Fed’s preferred inflation measure, annual Core PCE, remained at a three-year low

while home sales were subdued in June. Plus, economic growth in the second quarter

surprised to the upside. Here are last week’s headlines:

▪ Inflation Readings Keep Fed on Track for September Rate Cut

▪ Existing Home Sales Decline, Inventory Ticks Higher

▪ New Home Sales Hit 7-Month Low

▪ Second Quarter GDP Stronger Than Forecasted

▪ Jobless Claims Improve but Remain Elevated

Inflation Readings Keep Fed on Track for September Rate Cut

June’s Personal Consumption Expenditures (PCE) showed that headline inflation rose

0.1% from May, while the year-over-year reading declined from 2.6% to 2.5%. Core

PCE, the Fed’s preferred method which strips out volatile food and energy prices, rose

0.2% monthly. The year-over-year reading held steady at 2.6%, remaining at the lowest

level in three years.

What’s the bottom line? The Fed has been working hard to tame inflation, hiking its

benchmark Fed Funds Rate (which is the overnight borrowing rate for banks) eleven

times between March 2022 and July 2023. These hikes were designed to slow the

economy by making borrowing more expensive and lowering the demand for goods, so

pricing pressure and inflation would shrink.Inflation had been making good progress lower late last year before stalling in the first

quarter of this year, causing the Fed to hold rates steady since last September.

What’s the bottom line? While the number of closings declined in June, some of the

internals within the report point to demand remaining even in the face of elevated rates.

Homes remained on the market for a shorter period than in recent months, an average

of 22 days in June, down from 24 days in May, 26 days in April and 33 days in March.

Plus, almost one in three homes (29%) sold above list price.

Regarding inventory, there were 1.32 million homes available for sale at the end of

June, up 3.1% from May and 23.4% from a year earlier. While this remains below

healthy levels, rising inventory is certainly a step in the right direction to help improve

the persistent tight housing supply we’ve seen across much of the country.

What’s the bottom line? Despite the pullback in sales, buyers are still turning to the

new construction market, given the ongoing shortage of existing homes for sale.

However, more “available” supply (i.e. completed homes ready for buyers to move into)

is needed to meet buyer demand. Of the 476,000 new homes available for sale at the

end of June, only 102,000 were completed, with the rest either under construction or not

even started yet.Second Quarter GDP Stronger Than Forecasted

The advance estimate of Gross Domestic Product (GDP) for the second quarter showed

that the U.S. economy grew by 2.8% per the Bureau of Economic Analysis. This was

well above the 2% estimate and double the 1.4% growth seen in the first quarter of this

year.

What’s the bottom line? Economic activity was better than expected last quarter due

in part to strong consumer spending as well as inventory build. Note that this data could

be revised when the second and final readings are released on August 29 and

September 26, respectively.

Jobless Claims Improve but Remain Elevated

The number of people filing for unemployment benefits fell in the latest week, though

jobless claims remain elevated when compared to the beginning of this year. First-time

filers as measured by Initial Claims totaled 235,000, while 1.851 million people are

continuing to receive benefits after filing their initial claim.

What’s the bottom line? Both Initial and Continuing Claims have trended higher

throughout June and July, with Continuing Claims topping 1.8 million for the past seven

weeks. This shows that the pace of layoffs over the last two months has picked up at

the same time employers have slowed down hiring.

What to Look for This Week

It’s a jam-packed week. In housing news, look for appreciation data for May from Case-

Shiller and the Federal Housing Finance Agency on Tuesday. June’s Pending Home

Sales will be reported on Wednesday.

Labor sector data will also make headlines, with updates on job openings Tuesday,

private payrolls Wednesday, unemployment claims Thursday, and nonfarm payrolls and

the unemployment rate Friday.

Plus, the Fed’s two-day meeting begins Tuesday, with their Monetary Policy Statement

and press conference coming Wednesday afternoon.

Technical Picture

Mortgage Bonds finally broke above resistance at 100.91 on Friday and are trading in a

new range with 100.91 now acting as a floor and a ceiling at 101.20. The 10-year

bounced lower off the 4.25% ceiling on Friday, with room to improve until reaching the

floor at 4.17%.

Provided to you by:

Mary Adams

The Southwest Florida

Mortgage Group

Ph. 239-298-5333

madams@swflmtg.com

NMLS #247358

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