Daily Spotlight: Housing Needs Rate Relief

Summary

The underlying fundamentals of the housing market remain strong. Still, mortgage rates above 7% are pushing prospective buyers to the sidelines and could turn housing from being a contributor to 2024 economic growth to being a drag unless the economy gets rate relief. Homebuilder confidence declined for the first time since November 2023, according to the May National Association of Home Builders/Wells Fargo Housing Market Index. “The market has slowed down since mortgage rates increased and this has pushed many potential buyers back to the sidelines,” NAHB Chairman Carl Harris said after mortgage rates topped 7% for a fourth consecutive week. Other industry executives see strong drivers of long-term demand. “While it appears interest rates will remain higher for slightly longer, the market continues to remain massively underbuilt and pent-up demand is only being exacerbated,” said Nicholas Fink, CEO of Fortune Brands Innovations, whose products include Moen faucets, Therma Tru doors, and Master Locks. Based on the May 16 GDPNow estimate from the Atlanta Fed, residential fixed investment is expected to make a small positive contribution to 2Q GDP, but there are risks from new data that looks lackluster. The Commerce Department reported April Housing Starts of 1.36 million at a seasonally adjusted annual rate, down from 1.37 million year earlier. This morning, we expect the National Association of Realtors to report April Existing Home Sales of

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