Home sales stay surprisingly positive even with higher rates

Last week’s home sales data was surprising given the circumstances of fluctuating mortgage rates, trade war escalations, stocks slipping into bear market territory, and collapsing confidence data. Despite these challenges, the housing demand showed positive year-over-year growth after a reversal in rates. This unexpected resilience has left many amazed, especially considering the low bar set by historic lows in home sales. The question now is whether this trend can be sustained with elevated mortgage rates.

As inventory increases and price growth slows, the housing market is being positioned for improvement when mortgage rates fall. The recent purchase application data showed a less significant decline in week-to-week and year-over-year figures than expected, likely due to the low baseline. The unexpected positive readings and growth in purchase applications have surprised many, indicating a more optimistic outlook.

The latest weekly total pending contract data shows positive year-over-year trends, offering valuable insights into current housing demand. The trend in mortgage rates and 10-year yield has been promising, with positive developments suggesting a less stressful bond market. Despite recent market volatility widening mortgage spreads, there is hope for improvement in the future.

The growth in housing inventory has been a positive story over the past years, aiming for a more balanced market. New listings data is showing a positive trend, indicating a constructive market environment. Price cuts and price reductions are expected to increase slightly, reflecting the changing dynamics of the housing market.

Looking ahead, upcoming reports on new and existing home sales, service PMI, and consumer sentiment data will provide further insights into the housing market. The focus will also be on Federal Reserve presidents’ speeches and the potential impact of changing narratives on the market.