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Weekly economic review & outlook More mixed housing data imply continued supply constraints

October 25, 2021

You Need to Know

Week in review

Existing home sales surprise to the upside

Existing home sales rose for September to an annualized pace of 6.29 million despite the Delta variant and limited supply.

U.S. Treasury 10-year note yield has been moving higher

Expectations for higher inflation as well as eventual monetary policy tightening by the Fed have combined to push 10-year Treasury yields to the highest levels since March.

Week Ahead


Small decline expected for new home sales

According to the MBA, mortgage applications for new homes fell in September, suggesting that reported new home sales should have declined, as well. We project a modest drop in the annualized pace of new home sales for September to 735,000 units.

Real GDP growth expected to slow sharply

We project annualized third-quarter real GDP growth of 1.9 percent. While this is about the pace of trend growth pre-Covid, it is disappointingly slow with unemployment and capacity utilization still not at full employment levels.

Strong growth in personal income and consumer spending likely

We project PCE growth of 0.6 percent and moderate growth of 0.2 percent in the core PCE price index, which would bring the 12-month trend rate up slightly to 3.7 percent.

Existing home sales jumped by 7.0 percent for September to an annualized pace of 6.29 million units. This jump was accompanied by a decrease in the inventory-sales ratio and leaves the months’ supply at just 2.4 versus a long-term average of 4.7. The median price of an existing home sold fell for the third straight month (mostly from a change in the mix of where homes were sold) but over the past year prices are up by an unsustainable 13.3 percent. Positive fundamentals (strong job growth, low mortgage rates, etc.) have kept demand strong despite lack of supply and the rise in Covid cases over the past couple of months.

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