A quick note from us
Mortgage markets this week showed sensitivity to energy prices, with oil falling to its lowest since late February due to a potential easing of Middle East tensions. This helped reduce inflation worries, yet inflation remains elevated as the core PCE price index rose to 3.4% year-over-year in May, the highest since October 2023. Existing home sales rose 7% in May, hitting a record median price of $429,300, while new home sales and housing starts declined, signaling mixed market conditions. Builders continue to offer incentives amid negative sentiment, reflecting ongoing challenges in the housing sector.
What this means for buyers: Buyers in Los Angeles should be aware that while mortgage rates eased slightly, inflation pressures and low inventory keep prices elevated. The rise in existing home sales and record median prices suggest competition remains strong, but incentives from builders may offer some opportunities in new construction.
What this means for sellers: Sellers can expect continued demand for existing homes, supported by low inventory and rising prices. However, mixed signals from new home sales and builder sentiment indicate some caution, especially as buyers weigh options between resale and new construction properties.
Inflation and Energy Prices Impact Mortgage Markets
Oil prices dropped to their lowest levels since late February amid talks to ease Middle East tensions, helping to temper inflation concerns. Despite this, the core PCE price index increased to 3.4% annually in May, up from 3.3% in April, marking the highest inflation level since October 2023. This persistent inflation challenges the Federal Reserve's 2.0% target and keeps mortgage markets attentive.
What this means for buyers: Slightly lower mortgage rates may provide some relief, but ongoing inflation means borrowing costs could remain elevated. Buyers should prepare for a market where affordability is pressured by persistent inflation.
What this means for sellers: Inflation-driven costs may influence sellers' pricing strategies, but stable mortgage rates could support steady buyer interest in the near term.
Existing Home Sales Rise, New Home Sales Decline
In May, existing home sales rose 7% from April and were 7% higher than a year ago, with a median price reaching a record $429,300 for the month. Conversely, new home sales fell 7% from April to their lowest level since January and were down 7% year-over-year. This divergence highlights differing dynamics between resale and new construction markets.
What this means for buyers: Buyers may find more activity and competition in the resale market, while new home options could be more negotiable due to declining sales.
What this means for sellers: Sellers of existing homes can leverage strong demand and rising prices, but new home sellers face challenges requiring incentives to attract buyers.
Housing Starts and Builder Sentiment Show Challenges
Overall housing starts fell 15% in May, driven by a 40% plunge in multi-family units and a slight 2% drop in single-family starts. However, single-family building permits increased slightly, signaling some future construction activity. Builder sentiment remains negative at 35, with 62% offering sales incentives and 35% reducing prices to attract buyers.
What this means for buyers: Buyers might benefit from builder incentives and price reductions in new construction, though supply constraints persist.
What this means for sellers: Builders and sellers of new homes may need to continue offering incentives and price adjustments to maintain sales momentum.
Upcoming Economic Data and Market Focus
Market attention will remain on the Middle East conflict resolution efforts and Fed officials' comments on monetary policy. Key economic releases this week include JOLTS and Consumer Confidence on Tuesday, ISM Manufacturing on Wednesday, and the Employment report on Thursday. Mortgage markets will be closed on Friday for the July Fourth holiday.
What this means for buyers: Buyers should monitor economic data and geopolitical developments as they can influence mortgage rates and market conditions.
What this means for sellers: Sellers should stay informed on economic indicators that may affect buyer demand and financing availability.
Closing Remarks
Every buyer and seller enters the market with different priorities. For some, it is achieving the strongest possible price. For others, it is timing, certainty, or aligning the sale of one property with the purchase of another. In a market where mortgage rates are adjusting, inflation remains elevated, and new construction is increasing competition, strategy matters more than ever. The way a property is priced, negotiated, and managed from contract to closing can directly influence both your financial outcome and your timeline. The difference between a disciplined plan and a reactive one can equate to tens, and in some cases hundreds, of thousands of dollars. If you would like clarity on your home's value in today's rate environment, or a thoughtful plan for what you can confidently purchase as conditions evolve, we would welcome the conversation.
