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Week of November 20, 2023 in Review
It was a quiet week ahead of the Thanksgiving holiday, but the markets gobbled up the latest news on Existing Home Sales and Jobless Claims. Plus, find out what a key recession indicator is signaling. Here are the highlights:
Hope Ahead for Housing Inventory?
Weekly Jobless Claims Decline More Than Expected
Technical Picture
October Home Sales.
Existing Home Sales fell 4.1% from September to October to a 3.79-million-unit annualized pace, reaching a 13-year low, per the National Association of REALTORS® (NAR). Sales were also 14.6% lower than they were in October of last year. This report measures closings on existing homes and is a critical gauge for taking the pulse of the housing sector.
What’s the bottom line? The NAR noted that elevated mortgage rates and tight inventory remain key constraints on home sales. There were 1.15 million homes available for sale at the end of October, down from 1.22 million a year earlier.
Despite these ongoing inventory constraints, homes continue to sell quickly, 66% of homes sold in less than a month, showing that demand is strong for what’s available.
Yet, there was positive news for buyers as well. NAR’s Chief Economist, Lawrence Yun, noted that housing inventory is expected to improve heading into the spring.
Weekly Jobless Claims Decline More Than Expected
Initial Jobless Claims fell by 24,000 in the latest week, as 209,000 people filed for unemployment benefits for the first time. This decline was larger than expected and comes after first-time filings hit a three-month high in the previous week. Continuing Claims also fell by 22,000, as 1.84 million people are still receiving benefits after filing their initial claim. This was the first decline since September when Continuing Claims hit a low of 1.658 million.
What’s the bottom line? Initial Jobless Claims remain relatively low on a historical basis, suggesting that employers are trying to hold onto workers.What to Look for This Week
A plethora of housing news is ahead, starting Monday with October’s New Home Sales. Tuesday brings an update on home price appreciation for September via Case-Shiller and the Federal Housing Finance Agency. Look for October’s Pending Home Sales on Thursday.
Also of note, the second reading on third-quarter GDP will be reported on Wednesday, while the latest Jobless Claims and the Fed’s favored inflation measure, Personal Consumption Expenditures, will be delivered on Thursday.
Technical Picture
The 10-year treasury continues to flirt with lower levels. Last week's yield on the 10-year filled the open price-gap created on 9/20/23, following the September FOMC meeting. For those who follow my work, you know open price-gap are almost always filled, it’s just a matter of when. To that point, we currently have an open price-gap above, at roughly 4.7% - 4.8%. My expectation will be for this price-gap to also be filled…. The question is when. I‘m not convinced yields will continue to fall. However, if they do, I expect the 10-year to find solid support around 4.33%, at that point, a move higher would be pulled toward filling the open price gap above.
Mortgage-backed Securities (MBS) have, of course, enjoyed nice improvements as the yield on the 10-year Treasury fell. However, the rally may be running out of steam, as price pushes against resistance (purple line) and stochastics, a momentum indicator, are overbought and beginning to roll over. I would expect the moving averages, 100-day, and 50-day, to provide initial support.
What’s the bottom line? Interest rates and mortgage rates have seen good improvements over the last several weeks. In my view, it’s unlikely to see continued rapid improvement, rather some moderate give-back in the days and weeks ahead. The end of the year is usually pretty boring when it comes to market movement. So, I don’t expect big moves in either direction as we bid farewell to 2023.
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