The December 18 week is the last before the week between Christmas and New Years. The two weeks are normally a quiet time for consumers and many businesses not in the retail sector. It may be hard to find much to get markets excited now that the final FOMC meeting of 2023 is out of the way. Confidence is high that the Fed is done raising rates in this cycle, which makes the economic outlook more certain and one which includes rate cuts sooner or later. Any of the data released in the December 18 week are going to feel backward looking in light of this.
Nowhere will this be more evident than the week’s housing market data. Easing of financial conditions in anticipation of the FOMC holding rates steady at the December 12-13 meeting and perhaps over-anticipation of future rate cuts have brought mortgage rates down in recent weeks. For December to-date, the weekly Freddie Mac 30-year fixed mortgage rate is averaging 6.99 percent, the lowest since 6.85 percent in July. Housing market data for October, November, and early December will reflect activity associated more with the recent peaks in rates. The 30-year fixed rate has averaged over 7 percent since August and has dampened housing activity, although it hasn’t crushed it. The lack of inventory for existing homes has kept competition for those units brisk and encouraged homebuilders to address the deficit with new construction.
The NAHB/Wells Fargo housing market index is at 10:00 ET on Monday. It seems likely that the index for early December will move above the 34 reading in November that was the lowest since 31 in December 2022. The pace of home sales has been held in check by affordability issues – mostly elevated prices and higher interest rates. Homebuilders will see renewed opportunity now that mortgage rates have dipped below the psychologically formidable 7 percent, especially since they have been more willing to offer purchase incentives while lean supplies of existing homes mean buyers have to compete on price and concessions to secure the desired property.
As noted above, the November number on NAR sales of existing homes at 10:00 ET on Wednesday and the government report on sales of new single-family homes at 10:00 ET on Friday will be for sales made when mortgage rates were at near-term peaks. Existing home sales are for contracts closed and which were mostly inked September and October. Sales of new single-family homes are for contracts signed in November. Again, the lack of supply of existing units has driven buyers to new construction, which in turn means that although overall sales have fallen, homebuilding remains active.
