It was another good week for mortgage rates. Weaker than expected economic growth data and increased concerns about Iraq were favorable for mortgage rates. These factors outweighed the negative impact of improving data in the housing sector and mortgage rates ended the week a little lower.
The biggest surprise this week took place when first quarter Gross Domestic Product (GPD), the broadcast measure of economic growth, was revised substantially lower from -1.0% to -2.9%. This was the fastest rate of decline since the first quarter of 2009. The news caused mortgage rates to move lower.
The improvement in the mortgage rates may have been even greater, but investors took into account that unusually bad winter weather was the main cause. Consumers postponed shopping and businesses scaled back inventories. Much of the missed economic activity during the first quarter was simply delayed and GDP growth is expected to rebound to around 3.5% during the second quarter.
The housing data released this week showed nice improvement. May Existing Home Sales increased 5% from April, which was the largest monthly gain since August 2011. Total inventory of existing homes available for sale rose 2% to 5.6 month supply. May New Homes Sales jumped 19% from April to the highest level since May 2008. The April Case-Shiller 20-city home price index showed that home prices were 11% higher than one year ago.
Next week, the important monthly Employment report will come out on Thursday due to the holiday on Friday. As usual, this data on the number of jobs, the Unemployment Rate and wage inflation will be the most highly anticipated economic data of the month. Before that, Pending Home Sales and Chicago PMI Manufacturing will be released on Monday. ISM Manufacturing will come out on Tuesday, ADP Employment will be released on Wednesday, and ISM Services also will come out on Thursday. Mortgage markets will be closed on Friday in observance of Independence Day.