The Breakdown:

Pending Home Sales, a measurement of signed contracts on existing homes, fell for the first time since last November by a significant 5.2% in March. Lawrence Yun, chief economist of the NAR, captures our current challenge well in saying "The lack of inventory is a major constraint to rising sales. Multiple offers are still occurring on about a third of all listings, and 28% of homes are selling above list price."

The lack of inventory is shifting the focus of some buyers to new constructions and, because of that, New Home Sales increased by 9.6% in March! These were by far the most impressive New Home Sales numbers we've had in over a year, with a median sales price rising to $449,800 (from $433,200 in February). While the increase in New Home Sales is welcomed, less than 25% of the homes were completed new constructions and the remaining were either not started or under construction. The demand pressure won't be alleviated by new constructions in the near future, but existing homeowners will be happy to know that this continued high demand will be supportive of their home prices.

Both the Case-Shiller Home Price Index and the FHFA House Price Index reported appreciation gains for February. The Case-Shiller Index showed an increase of 0.2%, while the FHFA Index, which only accounts for single-family homes with conforming loan amounts, showed an increase of 0.5%! Homeowners are still looking at 4% annual appreciation on average. Even major cities, which account for the majority of recent drops in home prices, have bounced back.

In Economic news, Personal Consumption Expenditures (PCE), which is known to be the Fed's preferred measure of inflation, made an annual improvement from 5.1% down to 4.2%. Core PCE, which removes the more volatile food and energy prices, showed a less impressive annual change of -0.1%, now sitting at 4.6%.

As you're likely aware, inflation is the enemy of fixed investments, like mortgage bonds, because it erodes the buying power of a bond's fixed rate of return. To combat this, investors demand a higher interest rate on mortgage loans. If the downward trend in inflation continues, then we should continue to see a similar trend in mortgage rates.

We also received the first reading of Q1 GDP and it came in about half of what was expected, showing the economy grew by 1.1%. While this is the first of 3 readings and there will likely be revisions, GDP functions as our country's economic scorecard and this disappointing reading is yet another sign of a slowed economy.

We've got some more appreciation data to look over this week but the news everyone will be watching is the Monetary Policy Statement and press conference after the Fed's two-day meeting. The Fed is likely to hike the Fed Funds Rate again. Stay tuned for next week's breakdown!

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