Last week's economic calendar was dominated by the Fed's meeting and some key housing data from February. Let's dive into February's New and Existing Home Sales.
After twelve consecutive months of decline, Existing Home Sales rose by 14.5% in February! Despite what you may be hearing in the media, this report (measuring closings on existing homes) was a great show of increasing strength for the housing market.
Of the homes sold, the average time on the market was 34 days with 57% selling in less than a month. And while we did see an inventory increase in February, inventory levels are still at record lows which is why many homes are receiving multiple offers.
New Home Sales reported an increase as well, coming in with a 1.1% increase for February. This was much stronger than the anticipated 3% decline and marks the third consecutive month of New Home Sales increasing. The median sale price of these homes increased from $426k to $438k but keep in mind that this is not the same as appreciation.
Of the 436k new homes for sale in February, only 72,000 of them were completed while the rest were either under construction or not started. We are still seeing a backlog among builders but many homebuyers are opting to purchase a new home given the shortage in the inventory of existing homes.
Rather than pausing rate hikes following the banking crisis, the Fed decided to hike the Fed Funds Rate by 25 basis points in an effort to increase the public’s confidence in the Fed’s dedication to controlling inflation. This marks the ninth hike in the Fed Funds Rate in a year. Keep in mind that hiking the Fed Funds Rate does not increase mortgage rates. The Fed Funds Rate is the interest rate for the banks’ overnight borrowing. By raising this interest rate, the Fed is hoping to bring down inflation which will also bring mortgage rates down.
While inflation has been coming down in recent months, Jerome Powell, the Fed Chair, noted that there is a long way to go to reach the Fed’s goal of 2% inflation and that it will likely be a bumpy ride.
This week is another important one for housing data. We'll be reviewing January home price appreciation data from the Case-Shiller Home Price Index and the FHFA House Price Index, as well as February's Pending Home Sales. Stay tuned for next week's breakdown!
