US Existing-Home Sales Rise to Fastest Pace of the Year

Summary

US existing-home sales rose 3.2% in May to an annual rate of 4.17 million, beating expectations, but the strength was driven by lower mortgage rates from two months prior and is unlikely to persist as rates have since increased. The housing market remains bifurcated with high-end builders like Toll Brothers performing well. Upcoming CPI data is expected to show headline inflation at 4.2%, which may keep pressure on the Fed to hold rates high.

• Existing-home sales rose 3.2% in May to 4.17 million annual rate, beating the 1.1% gain forecast.
• Gains were largely due to lower mortgage rates from two months ago; rates have since moved higher.
• Single-family home sales climbed 3.5% while condos and co-ops were flat.
• High-end builder Toll Brothers is seen outperforming the lower-end segment of the market.
• CPI data the next day is forecast to jump to 4.2% headline, with core at 2.9%.
• Inflation is moving in the wrong direction, potentially complicating Fed policy.
• A sustained drop in mortgage rates is needed to meaningfully revive home sales.