Still hard to buy a house

Is housing weak? The most recent data show that house prices rose in February, and March new home sales rose nearly 10%. Pending home sales fell 5.2%, but it’s really the lack of available homes for sale that led sales lower. The National Association of Realtors says that multiple offers are occurring on about a third of all listings, and 28% of homes are selling above list price. At 6.43%, the 30-year fixed mortgage rate has risen slightly in recent weeks, but is even with year-end 2022, and below its recent peak of 7.08% on November 10. It seems unlikely that fearful consumers would be willing to step into their largest lifetime financial commitment. 

Weekly jobless claims rolled over again, falling from 246,000 to 230,000, in another sign of low layoff activity. Consumers remain confident in the job market and current conditions, but somewhat less so of the future. In the month-end update to the University of Michigan consumer survey, consumers’ outlook improved modestly from last month, but it was balanced by worsening assessments of personal finances due to higher expenses caused by higher prices. Year-ahead inflation expectations rose from 3.6% in March to 4.6%, but overall, consumers’ longer-run inflation expectations continue in the 2.9-3.1% range, where they have been for much of the last two years. 

Manufacturing data were somewhat mixed, as regional surveys were a bit softer, while durable goods orders surprised to the upside, led by aircraft orders. But against this backdrop, first quarter GDP was released at a disappointing gain of 1.1%. Consumer spending rose 3.7%, and core prices rose 4.9%, above the year-over-year rate of 4.6%. So, as the Federal Reserve gathers next week, it is faced with stubborn inflation and a strong job market.