Markets & Rates Recap
Markets wrapped up the week on solid footing. Stocks moved higher, with the Dow Jones Industrial Average up 183 points to 48,134 and the S&P 500 gaining nearly 60 points to close at 6,834. Mortgage bonds slipped modestly on the day, down about 6 basis points, pushing the 10-year Treasury yield 3 bps higher to 4.14%.
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Fed Commentary
Always-voting New York Fed President John Williams weighed in on policy restrictiveness and inflation dynamics. Williams estimates forward-looking inflation around 2.5% and places r*—the neutral rate that neither stimulates nor restrains growth—just under 1%, roughly 0.875%.
Using those assumptions, and subtracting inflation and r* from the current 3.625% Fed Funds rate, Williams believes policy is only modestly restrictive—by about 0.25%—and well positioned.
He also noted that inflation’s path hasn’t been linear. After a meaningful decline, progress stalled for a period, but Williams believes disinflation has resumed and pointed to encouraging elements within the latest Consumer Price Index report.
There has been some debate about distortions in that CPI data. Williams acknowledged that certain components—most notably shelter—were carried forward from September, effectively showing no inflation for the month. While we’ll need to see how future reports evolve, the key takeaway is that these numbers are now locked in, providing a favorable base effect over the next year. A similar or better reading next month would likely quiet skepticism and drive a stronger market response.
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Existing Home Sales
Existing Home Sales, reported by the National Association of Realtors, rose 0.5% in November to an annualized pace of 4.13 million units, roughly in line with expectations. October sales were revised higher, and when accounting for that, November activity was effectively up about 1%. Sales remain down roughly 1% year over year.
This data largely reflects buyers who were shopping and signing contracts in September and October, before mortgage rates reached their recent lows in mid-to-late October. While rates are no longer at those lows, average mortgage rates over the past three months are still the lowest we’ve seen since 2022.
At 4.13 million units, sales activity remains well below the more typical 5–5.5 million range, underscoring the continued buildup of pent-up demand.
The median home price declined 1.4% to $409,200, but it’s important to remember that this figure reflects the midpoint of homes sold—not true appreciation—and can be skewed by changes in the mix of transactions. Broader appreciation measures show national home values still rising at just over 1% year over year.
Inventory stood at 1.43 million homes at the end of November, down nearly 6% from October but still up 7.5% from a year ago. Seasonal declines in inventory are typical this time of year.
At the current sales pace, supply sits at 4.2 months—still tight compared to a more balanced market around 4.6 months. Homes are taking slightly longer to sell, averaging 36 days on market versus 34 in October and 32 a year ago.
Additional details:
•18% of homes sold above list price, unchanged from last year
•Cash buyers accounted for 27% of sales, up from 25%
•Investors made up 18% of transactions, up from 13%
•First-time buyers represented 30% of purchases, down from 32% last month and unchanged year over year