Home Sales Mixed 

During a light week for economic reports, investors continued to focus on the stronger than expected data released earlier in the month. Since faster economic growth increases the outlook for future inflation, mortgage rates ended the week a little higher.

Sales of previously owned (existing) homes currently account for about 85% of the market, and sales of new homes make up the remaining 15%. In September, new home sales rose 4% from August and were 6% higher than a year ago. The median new-home price of $426,300 was up slightly from last year at this time. In contrast to existing home sales, which measure closings during the month, new home sales are based on contracts signed, so they are a leading indicator of future housing market activity.

The headline figure for overall housing starts in September showed the expected slight decline from August, but the details of the report were more encouraging. The weakness this month was entirely due to multi-family units, while single-family housing starts rose 3% to the highest level in five months. Single-family building permits, a leading indicator of future construction, also increased in September. In addition, a separate survey of home builder sentiment on housing market conditions from the NAHB rose more than expected.

Investors will continue looking for Fed officials to elaborate on their plans for future monetary policy. For economic reports, third quarter GDP, the broadest measure of economic activity, will be released on Wednesday. Personal Income and the PCE price index, the inflation indicator favored by the Fed, will come out on Thursday. The key Employment report will be released on Friday, and these figures on the number of jobs, the unemployment rate, and wage inflation are always closely watched.