Housing Market Steady

The housing market is a critical component of the U.S. economy as it relates to economic growth and job creation, which is why the Federal Reserve gives housing data so much credence when setting monetary policy.  This makes the recent statistics on housing important and help inform our macro call for a steadily improving economy.  Both new (+18.6%) and existing (+4.9%) home sales rose solidly in May from the month before, indicating that the housing market is firming after a very weak first quarter.  Pending home sales, which reflect contract signings and occur a few months before a closing, rose 6.1% month/month.  In addition, Bloomberg is reporting that U.S. imports of furniture and building materials from Asia rose 6.3% in the first four months of the year, suggesting more demand for housing related products.  Offsetting these positives could be the headwind of higher mortgage rates.  Housing activity ground to a halt last year after the sharp 1% increase in mortgage rates during the summer, causing the Fed to continue with quantitative easing longer than originally expected.  The question now is, will higher rates have the same effect as 2013 or does the housing market have sufficient strength to weather the storm?