It’s the Economy That Matters: The Housing Market

Several key economic indicators are released every week to help provide insight into the overall health of the U.S. economy. Last week had a heavy focus on housing-related data that could impact home builders and residential real estate ETFs such as the Invesco Dynamic Building & Construction ETF (PKB), the iShares U.S. Home Construction ETF (ITB), the SPDR S&P Homebuilders ETF (XHB), and the iShares Residential and Multisector Real Estate ETF (REZ). In this article, we take a deeper look into three key housing releases from the past week: existing home sales, building permits, and housing starts. By examining this data, we gain valuable insights into the current state of the housing market and the broader economy.

Policymakers and advisors closely monitor economic indicators to understand the direction of interest rates. The data can significantly impact business decisions and financial markets. In the week ending on June 22, the SPDR S&P 500 ETF Trust (SPY) fell 1.00%, while the Invesco S&P 500® Equal Weight ETF (RSP) was down 1.54%.

Existing Home Sales

Existing home sales unexpectedly inched up 0.2% in May. The sales data from May likely reflects home sales that went under contract in April. In that period, mortgage rates had somewhat stabilized, albeit at relatively high levels. As a result of the steady rates, existing home sales barely budged from a seasonally adjusted annual rate of 4.29 million units in April to 4.30 million units in May. The latest data was above expectations that home sales were going to drop to 4.25 million units.

Mortgage rates also play a big role in why existing home inventory is extremely limited. Many current homeowners are sitting at lower rates than they locked in years ago. Thus, they are less motivated to sell their home only to get stuck with a higher rate. The tight supply coupled with strong demand continues to create competition among homebuyers. This results in multiple offers and subsequent price hikes. In May, the median price for an existing home reached $396,100, marking the fourth consecutive monthly increase.

Existing Home Sales