The latest real estate data shows the United States in desperate need of new housing inventory as sales of existing homes fell for the eleventh straight month in December. This is the lowest level since 2010 and home sales are 35% lower than last year at this time.
Housing Inventory Slow To Increase
New housing inventory is badly needed, but the latest data on this front contained mixed news. Housing Inventory levels were an encouraging 10% higher than a year ago, but remain at just a 2.9-month supply nationally. The median existing-home price of $366,900 was slightly higher than last December. Coming down from a record high of $413,800 in June.
In December, single-family housing starts rose 11% from November to the best level since August. Single-family building permits, a leading meter, fell 7% from November to the lowest level since February 2016. Builders reported that higher prices for land, materials, and skilled labor continued to hold back new housing inventory.
Mortgage Application Are Up Despite Lack of New Housing Inventory
Despite the lack of new housing inventory, mortgage application volumes have finally responded positively to the decline in mortgage rates. According to the latest data from the Mortgage Bankers Association (MBA), purchase applications jumped 25% last week.
They are, however, still down 35% from last year at this time. Increase housing inventory could combat this issue. Applications to refinance a loan soared an even larger 34% from last week. Those applications remain down a massive 81% from one year ago.
Retail Sales Plunge in December
With low new housing inventory and mortgage markets going through a volatile week, retail sales data was the primary influence. Consumer spending accounts for over 2/3 of US economic activity. A large increase of consumer spending in October raised investor optimism for a strong holiday season. However, severe weakness over the final two months of the year dashed those hopes. In December, retail sales plunged 1.1% from November. This is more than the consensus forecast, and the results for November were lower. The pullback was widespread, and weaknesses are most notable with department stores, furniture, restaurants, and bars.
Investors will continue to look for Fed guidance on the magnitude of future rate hikes and bond portfolio reduction. Fourth quarter gross domestic product (GDP), the broadest measure of economic activity, will be available Thursday. Also, New Home Sales come out on Thursday. The core PCE price index, the inflation indicator favored by the Fed, publishes on Friday. The next Fed meeting takes place on February 1st.
After the existing home sales data showed a lack of new housing inventory, mortgage rates declined by the end of the week. Never miss an update with MBSQuoteline. To receive by-the-minute updates on mortgage-backed securities, try our platform free for 14 days.
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