Inflation and Home Sales Decline, While Home Prices Reach Record Highs

Week of June 24, 2024 in Review

As we reflect on the past week, key economic indicators such as inflation and home sales have made headlines. Additionally, home prices have reached yet another record high. Let's delve into the details:

Economic Indicators Review

Inflation Cools in May

In May, the Personal Consumption Expenditures (PCE) index, a key measure of inflation, remained unchanged from April's level. However, the year-over-year rate declined slightly from 2.7% to 2.6%. Core PCE, which excludes volatile food and energy prices, also showed a minimal increase, with the year-over-year rate dropping to 2.6% from 2.8%. These figures suggest a stable inflationary environment, aligning with the Federal Reserve's target for price stability.

New Home Sales Slip

May saw a notable 11.3% decline in new home sales compared to April, significantly below market expectations. Year-over-year, new home sales were down by 16.5%. Despite this decrease, demand for new construction remains robust due to limited inventory of existing homes for sale.

Pending Home Sales Continue Lower

Pending home sales, a forward-looking indicator based on signed contracts for existing homes, fell by 2.1% in May. This marks a continuation of the decline observed in previous months, indicating challenges in the housing market despite strong price appreciation.

Home Price Gains Remain Strong

The Case-Shiller Home Price Index reported a 0.3% increase in home prices from March to April, with a year-over-year gain of 6.3%. Similarly, the Federal Housing Finance Agency's House Price Index noted a 0.2% rise in April, also showing a 6.3% increase year-over-year. These indices underscore sustained appreciation in home values nationwide.

First Quarter GDP Growth Revised Downward

The Bureau of Economic Analysis revised its estimate of first-quarter GDP growth to 1.4%, slightly below previous estimates. This reflects slower-than-expected economic expansion, influenced by declines in consumer spending and exports.

Initial Jobless Claims

Initial jobless claims declined marginally by 6,000 in the latest report, with 233,000 individuals filing new unemployment claims. However, continuing claims increased by 18,000, indicating ongoing challenges in the labor market.

Outlook for Mortgage Rates

Looking ahead, mortgage rates are expected to show moderate movement in the coming week. Economic indicators such as stable inflation and mixed signals in housing demand could influence market sentiment. Potential homebuyers and refinancers should monitor these developments closely for potential opportunities.

For further insights, you can refer to current mortgage rate updates and forecasts from Freddie Mac and other financial sources.