Skip to main content

Mortgage Economic Review For July 2022

Mark Paoletti
Jul 05, 2022
Mortgage Economic Review February table.

A summary and review of key economic data from June that affects the mortgage & real estate industry.

By Mark Paoletti
Mortgage Elements Inc

The Mortgage Economic Review is a monthly summary of key economic indicators, data, and events pertinent to mortgage and real estate professionals. 

AT A GLANCE: Key Economic Data and Events during June 2022

  • Interest Rates rose in June after the Federal Reserve increased the federal funds rate by 0.75%. The 10-year Treasury yield rose to 2.98% (June 30) from 2.85% (May 31).  
  • Housing: Existing home sales fell 3.4%, new home sales rose 10.7%, and pending home sales rose 0.7%. Home prices continued to climb at a 20% annual pace. 
  • Labor: The economy created 390,000 new jobs in May. The unemployment rate held steady at 3.6%, and wages increased 5.2% year over year.
  • Inflation: Consumer Price Index rose 1% (+8.6% YoY), Producer Price Index rose 0.8%% (+10.8% YoY) in May. 
  • The Economy: U.S. Gross Domestic Product contracted at a 1.6% annualized rate in the first quarter of 2022, up 3.5% YoY. 
  • Consumers: Retail sales fell 0.3% in May, consumer confidence and sentiment declined.
  • Stock markets all declined in June: Dow fell 6.7%, S&P fell 8.4%, Nasdaq fell 9.1%.
  • Oil & Energy: Oil prices fell during June, closing at $115/barrel (June 30) from $123 (May 31).

Interest Rates and Fed Watch  

The Fed raised the federal funds rate by 0.75% after the June 15 Federal Open Market Committee meeting. The increase is the largest interest rate hike the Fed has implemented since 1994, 28 years ago. The Fed may have plans to raise rates an additional 1.75% by year-end. Will that be enough to cool Inflation down to the 2% target? It's too early to tell. During Fed Chairman Jerome Powell's testimony before Congress, he reiterated his belief that current inflation is caused by supply-chain issues and is out of the Fed's control. Regarding inflation, he said, "We did underestimate it. With the benefit of hindsight, clearly, we did," and "the events of the last few months around the world have made it more difficult for us to achieve what we want, which is 2% inflation and still a strong labor market."  

Regarding a recession, he said it's "certainly a possibility. It's not our intended outcome," Many people believe a recession is impossible to avoid, or we may already be in one.

  • 10-Year Treasury Security Yield rose to 2.98% (June 30) from 2.85% (May 31).
  • 30-Year Treasury Bond Yield rose to 3.14% (June 30) from 3.07% (May 31). 
  • 30-Year Fixed Mortgage rose to 5.70% (June 30) from 5.10% (May 26).
  • 15-Year Fixed Mortgage rose to 4.83% (June 30) from 4.31% (May 26).
  • 5/1 ARM Mortgage rose to 4.50% (June 30) from 4.20% (May 26). 
  • Next FOMC Meeting: July 26-27.

Housing Market Data Released in June 2022

The combination of high mortgage rates and high home prices continued to take a toll on the housing market. Affordability is at multi-decade lows, causing many potential home buyers to abandon their search, which is reflected in lower existing home sales. Housing permits and starts collapsed as builder sentiment slumped. Home builders pulled back on starting new projects so they could concentrate their resources on completing projects already under construction. 

  • Existing home sales (closed deals in May) fell 3.4% to an annual rate of 5.41 million homes, down 8.6% in the last 12 months. The median price for all types of homes is $407,600, up 14.8% from a year ago. The median single-family home price is $414,600, up 14.6% YoY. The median condo price is $355,700, up 14.8% YoY. Homes were on the market for an average of 16 days, and 88% were on the market for less than a month. Currently, 1.16 million homes are for sale, down 4.1% from 1,21 million units a year ago; 25% of homes sold were all cash sales.
  • New home sales (signed contracts in May) rose 10.7% to a seasonally adjusted annual rate of 696,000 homes, down 5.9% YoY. The median new home price fell 1.3% (+15% YoY) to $449,000 from $454,700 the prior month. The average price fell 10.2% (+14.8% YoY) to $511,400 from $569,500 the prior month. There are 444,000 new homes for sale, a 7.7-month supply.
  • Pending Home Sales Index (signed contracts in May) rose 0.7% to 99.9 from 99.3 the previous month, down 13.6% YoY.
  • Building permits (issued in May) fell 7% to a seasonally adjusted annual rate of 1.695 million units, up 0.2% YoY. Single-family permits fell 5.5% to an annual pace of 1.11 million homes, down 7.9% YoY. 
  • Housing starts (excavation began in May) fell 14.4% to an annual adjusted rate of 1.55 million, down 3.5% YoY. Single-family starts fell 9.2% to 1.05 million units, down 5.3% YoY. 
  • Housing completions (completed in May) rose 9.1% to an annual adjusted rate of 1.47 million units, up 9.3% YoY. Single-family completions rose 2.8% to an annual adjusted rate of 1.04 million homes, up 8.5% YoY. 
  • S&P/Case-Shiller 20-City Home Price Index rose 2.3% in April, up  21.2% YoY. 
  • FHFA Home Price Index rose 1.6% in April, now up 18.8% YoY.  

Labor Market Economic Data Released in June 2022

The economy created 390,000 new jobs in May, and the unemployment rate has held steady at 3.6% for the last three months. Employers are all singing the same tune: They need workers. This is reflected in the latest JOLTS data showing 11.4 million job openings in May. Companies are limiting their growth, not because of a lack of customers but a lack of workers. Business leaders have raised the alarm that labor shortages are constraining output and growth. When companies can't grow, the economy can't grow. We could be headed into a "Demographic Recession" — one caused by a lack of workers and something we haven't seen in a long time. 

  • The Economy created 390,000 new jobs during May.
  • The unemployment rate was unchanged at 3.6% in May.
  • The labor force participation rate rose to 62.3 in May from 62.2% in April.
  • The average hourly wage rose 0.3% in May, up 5.2% YoY.
  • Job openings fell to 11.4 million in April from 11.55 million in March.         

Inflation Economic Data Released in June 2022

High inflation continued in May with the CPI up 1% for the month (+8.6% YoY). The Fed has stated it is committed to containing inflation. To fight high Inflation, the Fed raises interest rates to reduce demand. One reason the current economic predicament is perplexing is that the Fed and the politicians seem to be on opposite sides of the equation. The Fed is using restrictive monetary policy to dampen demand, which would reduce Inflation. The administration is using expansive fiscal policy to increase demand, which increases Inflation. They're not pulling in the same direction. This economic tug of war between the Fed and the administration exacerbates the situation.  

CPI rose 1%, up 8.6% YoY        |    Core CPI rose 0.6%, up 6.0% YoY
PPI rose 0.8%, up 10.8% YoY   |    Core PPI rose 0.7%, up 9.7% YoY
PCE rose 0.6, up 6.3% YoY       |   Core PCE rose 0.3%, up 4.7% YoY

GDP Economic Data Released in June 2022

The third estimate for first-quarter GDP showed the U.S. economy contracted by a 1.6% annualized rate, up 3.5% YoY. Economists disagree as to the state and future of the economy. Some think the economy is already in a recession. Others think one is coming in the second half of 2022, while  others believe we will have only a period of economic weakness. A "recession" is technically defined as two consecutive quarters of negative growth. The first quarter of 2022 is definitely negative. We'll get a look at second-quarter GDP in a few weeks. If that's negative, we're probably already in a recession, but the final say comes from the National Bureau of Economic Research (NBER). This recession will not be a typical one with high unemployment and declining prices.

Consumer Economic Data Released in June 2022

Consumer confidence and sentiment declined again in May. High prices and a constant barrage of bad news has put consumers in a gloomy mood. Gloomy consumers hang on to their wallets. Retail sales fell 0.3% for the month. With an economy that is 70% consumer-based, when people stop buying we get a recession. There was some encouraging news from major retailers. Several big box retailers stated they overestimated consumer demand and overbought inventory. So they'll have to lower prices to move that excess inventory. We'll take any help on prices that we can get. 

  • Retail Sales fell 0.3% during May, now up 8.1% in the last 12 months.
  • Consumer Confidence Index fell 4.4% to 98.7 from 106.4 the prior month, down 23.4% YoY.
  • Consumer Sentiment Index (Univ. of Michigan) fell to 50.0 from 55.2 the previous month. 

Energy, International, and Things You May Have Missed   

Oil and natural gas prices eased during June as the possibility of an impending recession will reduce oil demand.

  • West Texas Intermediate Crude fell to $106/barrel (June 30) from $116/barrel (May 31).
  • North Sea Brent Crude fell to $115/barrel (June 30) from $123/barrel (May 31).  
  • Natural Gas fell to $5.67/MMBtu (June 30) from $8.255/MMBtu (May 31).
  • The World Bank predicted that a recession will be difficult to avoid for many countries. 
  • Chinese Ports in Shanghai are almost back to normal, easing supply-chain concerns.
  • After four months of war, Russia has seized 20% of Ukraine’s territory.
  • The Supreme Court overturned Roe vs. Wade and returned the power to regulate abortions to the states.

The Mortgage Economic Review is produced by Mortgage Elements Inc. and MortgageElements.com, and is a concise summary of key economic data that influences the mortgage and real estate industries. The information is gathered from sources believed to be credible; some are opinion-based and editorial in nature. Mortgage Elements Inc. does not guarantee or warrant its accuracy or completeness.

Published
Jul 05, 2022
Higher Rates Mean Smaller Homes

Buyers need to search for cheaper homes, which typically translates to smaller ones. 

Analysis and Data
Oct 04, 2022
CoreLogic: Price Growth To Decelerate To 3.2% By August 2023

Prediction is based in part on U.S. home prices slowing for the fourth consecutive month.

Analysis and Data
Oct 04, 2022
Home Prices Decline, But Monthly Payments Soar

Black Knight finds home prices are on the decline, but soaring interest rates create record-breaking P&I payments.

Analysis and Data
Oct 03, 2022
The Kids Want To Be Homeowners

Nearly all teens (97%) surveyed thought it would be helpful if schools offered lessons that explained homeownership.

Analysis and Data
Sep 30, 2022
Home Price Appreciation Slows For 2nd Straight Month

homegenius says home prices rose at an annualized 12% from the month prior.

Analysis and Data
Sep 30, 2022
Mortgage Rates Spike For 6th Straight Week

Freddie Mac survey finds 30-year fixed-rate mortgages now average 6.7%, more than double the rate at this point last year.

Analysis and Data
Sep 29, 2022