Housing Market Update: Low Supply Challenges Home Sales While Unemployment Claims Reflect Hiring Slowdown

In this comprehensive housing market update, we delve into the latest data and trends impacting the real estate industry. The ongoing challenge of tight supply has weighed on existing home sales, while home builder confidence reaches a significant threshold. We also examine the state of single-family construction and the implications for housing prices. Additionally, we analyze the unemployment claims, shedding light on the prevailing hiring slowdown. Furthermore, we explore weakness in manufacturing, retail sales, and leading economic indicators, providing a comprehensive outlook on the state of the economy.

Outlook for This Week's Mortgage Rates

As we look ahead to the upcoming week, mortgage rates are expected to remain relatively stable. The current economic landscape, characterized by tight housing supply and a cautious approach to hiring, suggests that the Federal Reserve may maintain its accommodative stance. While some volatility in rates cannot be ruled out, any fluctuations are likely to be moderate. It's advisable for prospective homebuyers to stay informed about mortgage rate trends and consult with lenders for personalized guidance.

Tight Supply Takes the Spring Out of Existing Home Sales:

According to the National Association of Realtors (NAR), existing home sales fell 3.4% from March to April, reaching a 4.28 million unit annualized pace. Compared to the previous year, sales were 23.2% lower. The critical factor behind this decline is the persistently tight housing supply. Although housing inventory increased by 7.2% in April, it remains well below the norm, with just 2.9 months' supply available at the current sales pace. Despite the supply constraint, demand remains robust, as evidenced by homes selling quickly and investors capitalizing on the opportunities in the housing market.

Home Builder Confidence Reaches Key Threshold:

The National Association of Home Builders' Housing Market Index (HMI) climbed five points to 50 in May, reaching the midpoint that indicates expansion. This marks the fifth consecutive month of increased builder sentiment and the first time since July 2022 that it has reached this important threshold. All three components of the index showed gains, reflecting a positive outlook for the housing market. Home builders are also leveraging

incentives to attract buyers, while the lack of existing inventory continues to drive demand for new construction.

Gradual Improvement" In Single-family Construction:

While the construction of new homes saw a modest uptick in April, both Housing Starts and Building Permits for single-family homes remain lower than the previous year. The undersupply in the housing sector persists, with fewer new units reaching the market. This scarcity of supply, coupled with strong buyer demand, is expected to support home prices in the near term.

Unemployment Claims Trending Higher Despite Weekly Decline:

Although there was a weekly decline of 22,000 in initial jobless claims, the overall trend continues to reflect rising unemployment. Fraudulent claims in Massachusetts skewed the numbers in the previous week, contributing to the decline. Continuing jobless claims also dropped slightly, but the figures remain elevated compared to pre-pandemic levels. The sustained high levels of unemployment claims suggest a slowdown in hiring, highlighting challenges in the labor market.

Weakness in Manufacturing, Retail Sales, and Leading Indicators:

Negative readings in manufacturing indexes for the New York and Philadelphia regions indicate contraction, signaling recession-like conditions in the manufacturing sector. Retail sales, while showing a nominal increase, have seen their lowest growth rate in three years, with real sales declining significantly after adjusting for inflation. Additionally, the Leading Economic Index (LEI) declined for the thirteenth consecutive month, pointing to a contraction in economic activity and a mild recession by mid-2023, as projected by the Conference Board.