|Existing home sales rose 14.8% in February, snapping a full year of consecutive monthly declines. That’s the largest monthly increase since December 2015, excluding the pandemic snapback in the summer of 2020. Sales hit an annual rate of 4.58 million units sold. During 2015-19, sales averaged 5.4 million units annually.
Of the existing homes sold in February, the average time on market was 34 days. That’s up from 18 days a year earlier. Almost 3 out of 5 homes sold in February, or 57%, were sold within one month of going on the market.
New home sales rose 1.1% in February to an annual rate of 640,000 units. Sales in January were revised down from the initial reading of 670,000 units to 633,000 units. February’s reading virtually matches the 2022 pace of 641,000 units. By comparison, annual sales during 2015-19 averaged 595,000 units.
At the end of February, 72,000 completed new homes were on the market, more than double the 32,000 completed new homes on the market at the end of February 2022.
The Federal Reserve raised its target rate by 25 basis points on Wednesday, March 22, taking the target range to 4.75% to 5.00%. Before their first increase in this cycle, a 25-bp move on March 17, 2022, the target range had been 0.00% to 0.25% since March 2020. Until the SVB and Signature Bank collapses in mid-March, financial markets were anticipating a 50-bp increase this week due to stronger-than-expected inflation and employment data.
A change in the statement issued after the rate hike by the FOMC, the Fed’s monetary policy-making arm, appears to signal that the end of this rate-hike cycle may be on the horizon. Previous statements in the past year warned that “ongoing increases” may be necessary. This week’s statement now says that “some additional policy firming may be appropriate.
Of the six monetary tightening cycles since 1988, the current cycle has both the biggest percentage-point increase and the shortest time period. The second-most aggressive tightening cycle, started in 2004, took 25 months for a 4.2 percentage-point increase.
Members of the FOMC are projecting another increase in this cycle. According to their March 2023 projections, by year-end 2023, the median estimate of the mid-point of the target range is 5.1%. The projections of the individual FOMC members range from 4.9% to 5.9% by year-end.
The Consumer Price Index rose 0.4% in February, generating a 6.0% gain over the past year. The annual change over the last three months rose from 3.5% in January to 4.1% in February. The year-ago change in the Core CPI, which excludes the food and energy sectors, edged down from 5.6% in January to 5.5% in February.9
Payroll employment rose by 311,000 jobs in February, down from the gain of 504,000 jobs posted in January and below 2022’s average monthly increase of 399,400 jobs. The unemployment rate rose to 3.6% from 3.4% in January. Average hourly earnings in the private sector rose at a 3.6% annual rate over the three months ending in February, down from the 4.8% rate for all of 2022.
The daily yield on the 10-year Treasury fell by about half a percentage point in mid-March due to concerns over the financial system. In the past eight trading days (March 14 through March 23), the daily yield has ranged from 3.38% to 3.64%. On Thursday, March 23, the daily yield was 3.38%.
The average rate on 30-year fixed-rate mortgage applications submitted to Freddie Mac in the week ending March 23 was 6.42%, an 18-basis point decrease from the previous week. That follows a 13-basis-point drop the week before. Still, the average so far in March is running at 6.60%, up from February’s 6.26%. The rate reached a recent high of 7.08% in mid-November. The rate quoted is the average of 30-year fixed-rate conforming mortgages submitted to Freddie Mac.