Home Sales Rise

Headlines about progress to end the conflict in the Middle East continued to be the primary driver for mortgage markets, while the economic data caused little reaction. After climbing to their highest levels since July early in the week, mortgage rates reversed and ended slightly lower.

The latest home building data contained mixed news. In April, overall housing starts fell 3% from March, but the consensus forecast was a much larger decline. Multi-family units rose 10% from March to the highest level since May 2023, while single-family starts fell 9%. Single-family building permits, a leading indicator of future construction, dropped 3% from March to the lowest level since August. 

A separate survey of home builder sentiment on housing market conditions from the NAHB unexpectedly jumped to 37, well above the consensus forecast of 34. However, it has remained in negative territory below 50 for twenty-five straight months. According to the NAHB, 61% of builders used sales incentives in May and 32% cut prices.

Higher mortgage rates in recent weeks have been negative for overall loan origination activity but have boosted demand for adjustable-rate loans that offer lower rates. According to the Mortgage Bankers Association, applications to refinance dropped slightly from last week but still were 35% higher than one year ago. Purchase applications fell 4% from the prior week and were up 8% from last year at this time. The adjustable-rate mortgage share of total applications rose to nearly 10%, the highest level since October 2025.

Looking ahead, attention will remain fixed on the conflict in the Middle East. Investors also will monitor comments from Fed officials about future monetary policy. For economic data, Consumer Confidence will come out on Tuesday. New Home Sales, Personal Income, and the PCE price index, the inflation indicator favored by the Fed, will be released on Thursday. Mortgage markets will be closed on Monday for Memorial Day.