Market Update / June 18, 2021

Market Update / June 18, 2021
Weekly Mortgage & Economic Data – June 18, 2022
• According to the latest Freddie Mac Primary Mortgage Market Survey, mortgage rates surged as the 30-year fixed-rate mortgage moved up 55 basis points week over week, marking the largest one-week increase in the PMMS since 1987. Per on this day 30 year fixed rate is 5.78% 15 year fixed rate is 4.81%. These higher rates are the result of a shift in expectations about inflation and the course of monetary policy. Its Freddie’s opinion that these higher mortgage rates will lead to moderation from the blistering pace of housing activity that we have experienced coming out of the pandemic, ultimately resulting in a more balanced housing market.
• In an effort to combat inflation, the Federal Reserve hiked its benchmark interest rate by 0.75% on Wednesday. The size of the increase was unexpected as the market had been pricing in expectations of a .50% hike as recently as last Friday; rates have been their main tool to combat inflation. The move comes after the government released new numbers for the consumer price index that showed annual inflation increased at a rate of 8.3 percent, and the Bureau of Labor Statistics said last Friday that inflation rose 8.6 percent from a year ago. Chairman Jerome Powell noted that it is essential that we bring inflation down if we are to have a sustained period of strong labor market conditions that benefit all, and the Fed will continue to raise rates as needed throughout the year if inflation doesn’t abate.
• Housing starts on new U.S. homes fell 14.4% in May, the Commerce Department said Thursday. The annual rate of total housing starts fell to 1.55 million last month from a revised 1.81 million in April. “We expect housing starts to lose some momentum as 2022 progresses and as a sharp rise in mortgage rates sidelines some buyers. We think a shortage of supply and a record backlog of starts will keep activity from plummeting,” said Nancy Vanden Houten at Oxford Economics. According to the National Association of Builders, companies in residential construction have taken a more cautious stance as rising mortgage rates soften demand.
• Retail sales turned negative in May as consumers pulled back spending while inflation surged, the Commerce Department reported Wednesday. The decline in sales was unexpected as market forecasted sales rising 0.2%. The decline is the first of the year. Core retail sales, which exclude motor vehicle dealers and gasoline retailers, rose 0.1 percent for the month following an 0.8 percent gain in April. After adjusting for price changes, real core retail sales fell 0.6 percent in May but are up 1.8 percent from a year ago.