Markets in a Minute, Housing Market Updates July 21, 2023

This week’s financial and housing market activity update…

The Economy

• June’s retail sales reflect economic resilience despite modest growth
  The retail sector demonstrated its resilience by recording a rise in sales for the third consecutive month in June. Though the increase was slightly below initial expectations, it stands as a testament to the economy’s ability to weather challenges, even amidst recent Fed rate hikes. This positive trend in consumer spending can potentially have implications for the mortgage market, as it signals steady confidence among buyers in pursuing their homeownership dreams.
• Private sector employees’ average hours drop, prompting speculation on economic outlook
  An interesting trend emerges in the private sector, where employees are working fewer hours on average compared to pre-2019 levels. This development has sparked speculation about potential economic trends, with some interpreting it as a signal of a forthcoming recession. If such a scenario unfolds, it could potentially lead to lower mortgage rates, creating opportunities for prospective homebuyers to enter the real estate market.
• Decline in unemployment applications suggests stable demand for workers amidst moderate job gains
  The job market demonstrated resilience as unemployment applications declined, reaching their lowest level in two months. This decline indicates a steady demand for workers even as job gains exhibit a more moderate pace. The balance between job market dynamics can have implications for those considering homeownership, as a stable labor market fosters an environment of financial security and may influence their decision-making process.

Housing Market News

• Steady surge in homebuilder sentiment signals positive momentum
  In July, homebuilder sentiment continued its upward trajectory, marking the seventh consecutive increase, to reach an impressive score of 56. This marked the highest level recorded since June ’22. The consistent rise in sentiment underscores the confidence and optimism within the housing industry, suggesting favorable conditions for potential homebuyers and indicating a robust real estate market.
• Housing starts witness decline in June while building permits point to future growth
  June witnessed a notable 8% decline in housing starts, marking the most significant drop experienced in the past year. According to the National Association of Homebuilders’ news feed, the drop corresponds to pressures from high mortgage interest rates, elevated materials costs and reduced lot availability. In spite of all that, there is cautious optimism as building material costs have started going down and lower interest rates may be on the horizon. Single-family building permits rose 2.2% in June to reach a 12-month high. While that’s 2.7 lower than permit applications this time last year, it was the best reading in a year. This observation implies that despite the recent dip in construction, there is an expectation of renewed expansion in the real estate sector ahead.
• Mortgage applications inching upwards but well behind last year’s pace
  According to the Mortgage Bankers Association, purchase mortgage applications increased 1.1% last week from the previous week. Refinance applications were up 7% from the previous week, which was 30% below last year’s pace. The MBA reiterated that home-buying is still constrained by low housing supply and interest rates that are still higher than a year ago.