Week Ahead on Wall Street: Mortgage Relief?
By: Mario Ismailanji · June 17, 2024 · Reading Time: 5 minutes
Live and Die by the Rate
The Federal Reserve’s decision came and went, and we’re still no closer to knowing when the elusive first interest rate cut will come. To say people are a little frustrated would be an understatement, given the impact higher rates have on real lives, including the affordability of homes. We know that the Fed still expects to lower rates at some point this year, but exactly when is up in the air.
That hasn’t stopped investors from guessing though, with rate cut expectations rising as inflation data came in weaker this week. And even those expectations have implications for mortgage rates: If investors expect more rate cuts from the Fed, Treasury yields and other market-based proxies for interest rates react. Last week, for example, the 10-year Treasury yield fell from as high as 4.47% to 4.25% amid hopes for rate cuts. Mortgage rates tend to follow movements of this benchmark closely, so market expectations really matter when it comes to what some people pay for their home loans.
But has housing market activity collapsed under the higher Fed rates? No, far from it. The housing market might be slower than it was during the height of the pandemic, but it’s still alive and kicking. Mortgage refinancing activity is up over 55% in 2024 so far, even though rates are actually higher than they were at the beginning of the year.
This chart shows it best: anytime mortgage rates (magenta) have fallen there’s been an ensuing boost in refinance activity (blue), but they’re not necessarily needed for activity to improve. That’s right, mortgage rates are a part of the equation, but they’re not the only factor in deciding to buy a home.
One could draw a parallel from that to the broader economy as well. Lower interest rates would certainly help stimulate the economy, but it’s not the only thing that can. That’s why the economy has shown above-trend growth for most of the last several quarters in spite of high interest rates.
Economic and Earnings Calendar
Monday
• June Empire State Manufacturing Activity: The New York Fed’s survey of manufacturing executives in the region on business conditions and their outlook.
• Fedspeak: Philadelphia Fed President Patrick Harker will give a speech on the economic outlook. Fed Governor Lisa Cook will give acceptance remarks at the 2024 Marshall Forum.
• Earnings: Lennar (LEN)
Tuesday
• June New York Services Activity: The New York Fed’s survey of manufacturing executives in the region on business conditions and their outlook.
• May Retail Sales: This measures spending at retail stores and is a key indicator of consumer demand.
• May Industrial Production and Capacity Utilization: The industrial sector accounts for much of the cyclical swings in economic activity.
• Fedspeak: Richmond Fed President Thomas Barkin will give a speech on the U.S. economy and Federal Reserve. Boston Fed President Susan Collins will give keynote remarks at the Lawrence Partnership Annual Meeting. Dallas Fed President Lorie Logan will participate in a moderated Q&A at the Headliners Club in Austin. Fed Governor Adriana Kugler will speak on the economic outlook and monetary policy. St. Louis Fed President Alberto Musalem will speak on the economic outlook and monetary policy. Chicago Fed President Austan Goolsbee will participate in a panel discussion at the 2024 Marshall Forum.
Wednesday
• June NAHB Housing Market Index: This index tracks how homebuilders feel about the current and future state of the single-family housing market.
• Weekly Mortgage Applications: Mortgage activity gives insight on demand conditions in the housing market.
Thursday
• May Building Permits and Housing Starts: Construction data is a leading indicator of business activity.
• June Philadelphia Fed Manufacturing Activity: The Philadelphia Fed’s survey of manufacturing executives in the region on business conditions and their outlook.
• Weekly Jobless Claims: This high frequency labor market data gives insight into filings for unemployment benefits. Jobless claims have continued to show a labor market that remains strong despite having cooled.
• Fedspeak: Richmond Fed President Thomas Barkin will give a speech on the economic outlook.
• Earnings: Accenture (ACN), Darden Restaurants (DRI), Jabil (JBL), Kroger (KR)
Friday
• June S&P Global US PMIs: These indexes track how purchasing managers across different industries feel about the business environment.
• May Leading Economic Index: This is an index composed of various economic indicators that have historically led changes in the broader economy.
• May Existing Home Sales: Most home transactions in any given month tend to come from the existing market, and as a result set the tone for the broader housing market.
• Earnings: FactSet Research Systems (FDS), CarMax (KMX)
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