Weak Confidence Offsets Inflation
Despite higher than expected inflation data, investors were more focused last week on hints of weakening in the economy. In particular, consumer confidence badly missed the mark. As a result, mortgage rates ended last week a little lower.
Core PCE Rises Slightly
Fed officials keep a close eye on inflation, and the PCE price index is their favored indicator. In May, Core PCE was 2.7% higher than a year ago, up from an annual rate of increase of 2.6% last month, and slightly above the consensus forecast. Progress toward the 2.0% target of the Fed has not been easy, and this desired level has not been achieved since February 2021. The big question remains how large an impact higher tariffs will have on future inflation levels.
Consumer Confidence Slides Sharply
The latest report on consumer confidence published by the Conference Board revealed that consumers remain concerned about the impact of higher tariffs. The index dropped sharply in June to 93, far below the consensus forecast of 99, and the decline was seen across nearly all age and income groups. In particular, the outlook for the labor market weakened. The share of consumers viewing jobs as plentiful was the smallest since March 2021, and the number expecting their incomes to increase over the next six months was lower.
Existing Home Sales Inch Up
In May, sales of existing homes unexpectedly rose slightly from April, but still were at the slowest pace for May since 2009. The median existing-home price of $422,800 was up a slim 1% from last year at this time, but at a record for the month of May. Inventories remain stuck at historically low levels, standing at just a 4.6-month supply nationally, below the roughly 6-month supply typical in a balanced market. However, this was the largest level in five years, and inventories were over 20% higher than a year ago.
New Home Sales Plunge
Sales of new homes displayed much worse performance in May, falling 14% from April, far more than the consensus forecast. The median new-home price of $426,600 was up 3% from last year at this time. The supply of new homes remains near the highest level since 2009. In contrast to existing home sales, which measure actual closing during the month, new home sales are based on contracts signed, making them a leading indicator of future housing market activity.
Mortgage Rates for the week of 6-30-2025