Mortgage Rate Outlook & Market Analysis

Before diving into this week's economic highlights, let's take a moment to consider the outlook for mortgage rates. As of late, the Federal Reserve has been vigilant in monitoring inflationary pressures, with particular emphasis on achieving their 2% target. This focus has led to a series of interest rate hikes aimed at tempering inflation. However, recent data indicating a slower-than-expected economic growth rate, coupled with a slight uptick in initial jobless claims, may prompt the Fed to reassess its approach.

Given the nuanced interplay of economic indicators, mortgage rate movements can be unpredictable. That being said, it's essential to keep a close eye on upcoming reports, particularly those concerning inflation and employment figures. Any significant deviations from expectations could sway the Fed's stance on interest rates, consequently influencing mortgage rates. As we delve into this week's economic review, stay tuned for insights that could shed light on the trajectory of mortgage rates in the near future.

Week of May 27, 2024 in Review

Progress towards the Fed’s 2% inflation target remains stalled while signed contracts on existing homes fell in April. Meanwhile, home prices continue to hit new highs this year. Read on for these stories and more.

Inflation Not Heating Up But Not Cooling Off

April’s Personal Consumption Expenditures (PCE) showed that headline inflation rose 0.3% from March, with the year-over-year reading holding steady at 2.7%. Core PCE, the Fed’s preferred method which strips out volatile food and energy prices, also rose by 0.2% monthly. The year-over-year reading remained at 2.8%, stalling progress toward the Fed’s 2% target.

The Fed's cautious approach to rate adjustments hinges on a delicate balance between inflationary pressures and employment figures. As such, forthcoming data releases, including the unemployment rate for May, will be closely scrutinized for insights into the Fed's future policy decisions.

Pending Home Sales Plunge in April

Pending Home Sales fell 7.7% from March to April per the National Association of REALTORS (NAR), coming in well below estimates of a modest decline. Sales were also 7.4% lower than they were a year earlier. This report measures signed contracts on existing homes, making it an important forward-looking indicator for closings on these homes as measured in the Existing Home Sales report.

Home Price Gains Continue

The Case-Shiller Home Price Index, which is considered the “gold standard” for appreciation, showed home prices nationwide rose 0.3% from February to March after seasonal adjustment. Home values in March were also 6.5% higher than a year earlier, unchanged from the previous report.

The Federal Housing Finance Agency’s (FHFA) House Price Index also reported a 0.1% jump in home prices from February to March, with prices 6.7% higher than the previous year.

First Quarter GDP Weaker Than Initially Reported

The U.S. economy grew more slowly than previously thought during the first quarter, per the Bureau of Economic Analysis, as their second estimate of Gross Domestic Product (GDP) for that period showed 1.3% growth.

Initial Jobless Claims Tick Slightly Higher

Initial Jobless Claims rose by 3,000 in the latest week, with 219,000 people filing new unemployment claims. There were also 1.791 million people still receiving benefits after filing their initial claim, as Continuing Claims increased by 4,000.

As we reflect on this week's economic data, it's evident that the housing market continues to face headwinds while inflation remains a key focal point for policymakers. Stay tuned for further updates on the economic landscape and its potential implications for mortgage rates.