The housing market was in focus last week as multiple data points hinted at pressure on the market, due to higher prices and mortgage rates. New home sales for July showed a 13.4% decline from June, the sharpest drop in three years, bringing the annual sales pace down to 394k. While still higher than last year by 6.8%, sales were far below economist estimates for a gain of 490k and prior months sales numbers were revised lower. This coincides with news out of Wells Fargo, the largest home loan lender in the U.S., that the bank is eliminating 2,300 jobs in its mortgage-production unit. These cuts represent 20% of the division and will be focused on loan officers as the bank “re-calibrates our business to meet customers’ needs and ensure that we’re operating as efficiently and effectively as possible.” In contrast, existing home sales were reported at the highest level in four years. This could be due to how the different series are measured, with existing home sales tallied at closing, which could be up to 2 months after contract signing. New home sales are tallied at signing and captured market activity with the higher rates seen in July. The housing market has been a key contributor to economic growth over the past 3 years. Any slowdown could have consequences for how the US economy grows in the second half of the year, as well as what actions the Fed takes in regards to quantitative easing. If pressure on the housing market remains and the Fed goes ahead with their plans to reduce asset purchases, look for these reduction in bond purchases to take place in Treasurys as opposed to mortgage-backed securities.