U.S. Retail Sales Growth Falls Short, Mortgage Demand Flat Despite Low Rates, Home Prices Hit Record High Amid Sales Decline: Portafolio Capital Markets Recap for Week Ending 06/21/2024
Retail sales in the U.S. saw a modest increase of 0.1% in May (vs the expected .2%), signaling a weaker than expected performance. Economists had anticipated a more robust growth given previous trends, suggesting that consumers might be exercising caution in their spending. Year-over-year, sales increased by 2.3%. However, excluding autos, sales dipped by 0.1%, missing the forecasted 0.2% rise. Lower gas prices contributed to a 2.2% decrease in gas station sales, though this was partially balanced by a 2.8% rise in sales at sports goods, music, and book stores. Online retailers saw a 0.8% growth, whereas bars and restaurants experienced a 0.4% drop. Additionally, furniture and home furnishing stores reported a 1.1% decline.
The entire report by the U.S Census Bureau can be found here.
Mortgage demand has remained flat despite a significant drop in interest rates, which have reached their lowest point since March. The stagnation in demand suggests that potential homebuyers might be hesitant due to economic uncertainties or possibly the high prices of homes relative to incomes. The Market Composite Index, which gauges mortgage loan application volume, saw a 0.9% increase on a seasonally adjusted basis from the previous week, although it dropped 0.1% on an unadjusted basis. The Refinance Index fell by 0.4% week-over-week but was 30% higher than the same week last year. The seasonally adjusted Purchase Index rose by 2%, while the unadjusted Purchase Index decreased by 0.1% from the previous week and was 12% lower than the same week a year ago.
Refinance applications made up 35.2% of total mortgage activity, unchanged from the previous week. The share of adjustable-rate mortgages (ARMs) declined to 6.0% of total applications. The FHA share of applications decreased to 12.7% from 13.1%, while the VA share increased slightly to 14.8% from 14.7%. The USDA's share remained steady at 0.4%.
Interest rates for 30-year fixed-rate mortgages with conforming loan balances decreased to 6.94% from 7.02%, and points dropped to 0.61 from 0.65 for loans with an 80% loan-to-value ratio (LTV). The effective rate also decreased. Similarly, the rate for jumbo loans decreased to 7.12% from 7.18%, with points reducing to 0.48 from 0.54 for 80% LTV loans, and the effective rate also saw a reduction.
The latest report by the Mortgage Bankers Association can be found here.
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In May, the real estate market saw a drastic shift as home prices soared to record highs, while simultaneously, home sales experienced a significant decline. This imbalance is attributed to limited housing inventory coupled with sustained high demand, making it increasingly challenging for potential buyers. In May, the inventory of homes for sale increased by 6.7% compared to the previous month and was 18.5% higher than in May of the previous year. Additionally, the median price of an existing home sold reached a record high of $419,300, according to the Realtors' records, marking a 5.8% increase from the previous year. Home sales under $250,000 decreased compared to last year, while sales in the $250,000 to $500,000 range saw a modest increase of 1%. In higher price brackets, sales of homes priced between $750,000 and $1 million rose by 13%, and sales of homes over $1 million increased by nearly 23%.
The full report by the National Association of Realtors (NAR) can be found here.
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