What did we learn last week? Mortgage rates in the U.S. faced the biggest weekly decline in nearly 41 years, providing some relief after a rapid run-up that quickly priced out homebuyers. The average rate for a 30-year fixed mortgage was 6.61 percent, the lowest in almost two months. We also learned that existing home sales fell for the ninth month in a row, according to the National Association of Realtors. Home sales fell 5.9 percent month-over-month to a seasonally-adjusted annual rate of 4.43 million, down 28.4 percent from a year ago. Blame high prices and high mortgage rates, which are negatively affecting affordability.
Retail sales increased 1.3 percent in October, above analysts’ expectations for a 0.9 percent increase. Core retail sales increased by 0.7 percent which was also above market consensus. Producer prices increased by 0.2 percent which is the same monthly increase observed in September but it was below expectations for a 0.5 percent increase. Year-over-year prices increased by 8.0 percent, the fourth consecutive month where the annual growth rate decreased from the previous month. Industrial production contracted by 0.1 percent as mining and utilities output fell during the month. Housing starts fell 4.2 percent in October to an annualized rate of 1.425 million but remained above the average rate over the last 10 years of 1.206 million units. The long-run average over the entire data series dating back to 1959 is 1.434 million units. A clear shift in inflation expectations as well as a slowdown in the pace of interest rate increases next month could signal we are near the peak in rates and provide some stability in housing demand.
This week ahead is anticipated to see reduced market volume as it is Thanksgiving Day on Thursday followed by an early close on Friday with many participants likely taking the full week off. The economic calendar is full of month-end Treasury supply, including an auction of $42 billion 2-year notes and $43 billion 5-year notes today. As for economic releases, today there is just the October Chicago Fed National Activity Index. Tomorrow brings Philly Fed non-manufacturing, S&P PMI November flashes, and Richmond Fed manufacturing and services indexes, while on Wednesday are durable goods, consumer sentiment, and new home sales. We begin the week with Agency MBS prices nearly unchanged from Friday and the 10-year yielding 3.81 after closing last week at 3.82 percent.
Market Commentary by Rob Chrisman of the Chrisman Commentary
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