Jeff Tucker, Chief Economist for the City of Windermere, looks at oil, inflation and pending home sales and explains what they mean for summer home sales.
The economic outlook has changed again over the past month. While some of the biggest pressures facing consumers and homebuyers appear to be easing, we’re not out of the woods yet, and some surprising housing trends suggest the market may have more momentum than most expected.
Read about the important numbers you need to know now.
Number you need to know: $78
First number we learned this month: $78. This is the price of a barrel of oil as of June 16, after falling by about $30 in the last month alone. Much of that decline is due to a memorandum of understanding signed between the United States and Iran that marked the beginning of the end of the war that closed the Strait of Hormuz.
Number known: 4.2%
Second number we know this month: 4.2 percent. This is the year-on-year rate of inflation as of May, and is the highest annual inflation rate in the past three years. This reflects that cost pressures from the disruption of the Iran war continue to ripple through the economy.
The producer price index, which measures cost pressures upstream in the supply chain, also continued to accelerate in May, at 6.2%. The hope is that this situation will start to slow down as economic costs fall due to lower oil prices.
Bond yields remain high but are starting to fall. The 10-year Treasury yield is down about a quarter of a point from its peak in mid-May.
Similarly, 30-year mortgage rates are starting to fall, but are still significantly higher than they were earlier this year. Mortgage News Daily and Freddie Mac both report that the average mortgage rate is just over 6.5%.
Known number: 5%
As for the housing market, inventory growth slowed again in May, ending the month with only a 2% increase in active listings compared to the same period last year.
And most surprisingly, May’s pending sales were up 5% year-over-year, according to Realtor.com, indicating a belated recovery in demand to end the spring sales season on a strong note. If mortgage rates continue to fall, the strong sales activity could continue into the summer.
Jeff Tucker is principal economist at Windermere Real Estate in Seattle, Washington. Connect with him on X or Facebook.
