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Economic update for the week ending April 23, 2022

Stock markets dropped for a fourth straight week – Stock markets dropped further this week as fears of higher interest rates due to high inflation sent stocks lower. Comments by Fed Chairman, Jarome Powel on Thursday which included “taming inflation is absolutely essential” led investors to believe that an interest rate hike of at least ½% would be announced at the May 3-4 Fed meeting. Those comments caused the Dow, which was up for the week on Wednesday, to fall almost 1,000 points on Thursday.

  • The Dow Jones Industrial Average closed the week at 33,811.40, down 1.9% from 34,451.23 last week. Its down 7.0% year-to-date.

  • The S&P 500 closed the week at 4,271.78, down 2.8% from 4,392.28 last week. The S&P is down 19.4% year-to-date.

  • The NASDAQ closed the week at 12,839.29, down 3.8% from 13,351.08 last week. It is down 18.0%, year-to-date.

U.S. Treasury bond yields - The 10-year treasury bond closed the week yielding 2.90%, up from 2.83% last week. The 30-year treasury bond yield ended the week at 2.95%, up from 2.92% last week. We watch bond yields because mortgage rates often follow treasury bond yields.

Mortgage rates – Home mortgage rates have continued to increase. Freddie Mac Primary Mortgage Survey reported that mortgage rates as of April 21, 2022, for the most popular loan products were as follows:

  • The 30-year fixed mortgage rate was 5.11%, up from 5.00% last week.

  • The 15-year fixed was 4.38% up from 4.17% last week.

  • The 5-year ARM was 3.75%, up from 3.69% last week.

March 2022 home sales – Home sales figures are released in the third week of the month for the previous month.

U.S. existing-home sales - The National Association of Realtors reported that existing-home sales totaled 5.77 million on a seasonally adjusted annualized rate in March, down 2.7% month-over-month from the annualized rate of sales in February. Year-over-year sales were down 4.5% from the annualized rate of 6.04 million in March 2021. The median price of a home in the U.S. in March was $375,300, up 15.0% from $326,300 one year ago. March marked a record 121 consecutive months of year-over-year increases in the median price. Inventory levels remained near record lows. There was just a 2-month supply of homes for sale in March, down from a 2.1-month supply one year ago. First-time buyers accounted for 30% of all sales. Investors and second-home purchases accounted for 18% of all sales. All-cash purchases accounted for 28% of all sales. Foreclosure and short-sales accounted for less than 1% of all sales remaining at a historic low.

NAHB Housing Market Index

The National Association of Home Builders' Housing Market Index declined by -2.0 points in April, dropping from 79 to 77. This is now the lowest level since last September and the fourth consecutive decline from December's print at 84.0. According to the NAHB, "Despite low existing inventory, builders report sales traffic and current sales conditions have declined to their lowest points since last summer as a sharp jump in mortgage rates and persistent supply chain disruptions continue to unsettle the housing market." They said that the market faces an "inflection point", with affordability suffering from higher rates, home prices, and higher material costs, "particularly in the crucial entry-level market." The buyer traffic index was down -6.0 points to 60 and is now lower by -11.0 points in four months. The current sales component was also weaker, down -2.0 points to 85.0. Despite weakening affordability, the six month ahead expected sales index rose 3.0 points to 73.0.

Housing Starts

Housing starts increased by .3% in March to a seasonally adjusted annual rate of 1.793mln units vs. a revised 1.788mln in the prior month. Starts were 3.9% above the March 2021 rate of 1.725mln. Single-family starts in March were down -1.7% to 1.2mln from the revised February figure of 1.221mln. Multi-family starts were up 7.5% to 574k. Building permits rose .4% to 1.873mln units in March and are up 6.7% above the March 2021 rate of 1.755mln units. Single-family permits were at a rate of 1.147mln, which is down by -4.8% below the revised February print at 1.205mln. Multi-family permits were at a rate of 672k, which is up a strong 10.9%. Broken out by region, the South saw overall starts plunge from 1.007mln to 834k, while the Northeast had them spike from 139k to 293k. They were up in the West to 434k from 403k, but down in the Midwest to 232k from 239k. On the permits side, there were gains in the Northeast (190k from 171k) and Midwest (258k from 251k) offset by declines in the South (959k from 960k) and West (466k from 483k).

Mortgage Applications

The MBA weekly mortgage applications index declined -5.0% for the week ending April 15th. Purchase applications fell -2.0% and were -14.0% lower than the same week a year ago. Refinance applications declined by -8.0% and were -68.0% lower vs. the same week last year. "Ongoing concerns about rapid inflation and tighter US monetary policy continued to push Treasury yields higher, driving mortgage rates to their highest level in over a decade. Rates increased across the board for all loan types, with the 30-year fixed rate hitting 5.2%, the highest level since 2010," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "The 30-year rate has increased 70 basis points over the past month and is 2 full percentage points higher than a year ago. The recent surge in mortgage rates has shut most borrowers out of rate/term refinances, causing the refinance index to fall for the sixth consecutive week. In a housing market facing affordability challenges and low inventory, higher rates are causing a pullback or delay in home purchase demand as well. Home purchase activity has been volatile in recent weeks and has yet to see the typical pick up for this time of the year."