It was another difficult week for prospective home buyers. Existing home sales for April were lighter than expected and down 2.7% from the previous month. The decline to 5.85 million, lower than the expected 6.08 million, makes April the third consecutive month of declines.
Equities rebounded amid a down month with the S&P 500 advancing 1.4% on the week. Higher beta stocks had a better bounce with the Russell 2000 Index up 2.8% and the NASDAQ Composite up 2.1%.
Higher-than-expected inflation was a large market-influencing concern this week. In April, prices increased by 4.2% year-over-year, as measured by the Consumer Price Index (CPI). The increase is the largest 12-month rise since September 2008 when prices grew by 4.9%.
The S&P 500 was down slightly on the week as sector dispersion was again a major factor. Materials were up more than 4% while both energy and financials gained. The NASDAQ was down 3.3% as technology bellwethers were sold aggressively following good earnings.
There was another drop in existing home sales this week. Only 6.01 million homes were sold in March, down from February’s 6.24 million. This is the second consecutive month we have seen a drop.
If you’ve been following the markets during the pandemic, as it seems everyone has, you know it’s been very quiet. Really nothing new happening. Wait a minute, what? Quite the opposite is true.
The S&P 500 pushed higher despite some softness mid-week. Upside was achieved by the more defensive sectors as growth and small caps struggled to gain traction. The S&P 500 ended the week up 1.2%, but small cap stocks finished in the red.
Earnings season has begun with strong expectations for the first quarter. Stimulus payments in March are expected to positively impact company earnings. The current forecast is for earnings per share to grow by 29.25%.
We all know people who have been looking for a house over the last few months. This search story is similar across the country.
Lack of Supply + High Demand = Inflated Prices
Pre-2020, a common refrain was that millennials are just not buying houses.