A day after the National Association of Realtors reported a 2.7 percent rise in existing-home sales for the year through May, the Office of Federal Housing Enterprise Oversight, a division of the Federal Housing Finance Agency, reported a 6.8 percent increase in home-purchase prices for the 12 months through April. Among the nine Census regions covered in the report, year-over-year price increases ranged from 5.3 percent in New England to 8.9 percent in the Mountain States region.
The FHFA monthly Home Price Index is calculated using home-sales price information from mortgages sold to or guaranteed by Fannie Mae or Freddie Mac. The April result was the fastest pace of growth since January 2014. Even though levels of sales and construction activity remain below prior peaks, the months’ supply of homes on the market remains low, putting upward pressure on home prices. Strong consumer fundamentals — a strong labor market, high levels of consumer confidence, and relatively healthy balance sheets — remain positive factors for the housing market. However, the combination of tight supply, rising prices, and higher interest rates may restrain gains in the months and quarters ahead.
Initial claims for unemployment insurance rose 3,000 to 241,000 in the week ending June 17. The previous week’s estimate was 238,000, slightly higher than the original estimate of 237,000. The four-week moving average, which helps smooth out weekly volatility in the data, rose 1,500 to 244,750. A level of initial claims below 300,000 is generally considered consistent with a strong labor market. Claims have been below that key level since March 6, 2015, the longest stretch since the early 1970s. As a percentage of employment, initial claims are just 0.16 percent, the lowest on record.
Earlier this month, the Bureau of Labor Statistics reported a record 6 million open jobs in April. Combined with rising corporate profits and relatively high levels of business confidence, demand for workers is likely to remain robust. Strong demand amid a tightening labor pool should maintain upward pressure on wages, helping sustain consumer spending. So far, that virtuous cycle has not resulted in significantly faster price gains, allowing the Fed to take a cautious and deliberate pace for normalizing policy. All told, conditions appear to support a positive outlook for the economy, with little chance of recession in the coming months and quarters.