Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

U.S. Housing Market Recovery? Nah, It’s Just Spiking Mortgage Rates

Housing-Market / US Housing Jun 24, 2015 - 09:34 AM GMT

By: John_Rubino

Housing-Market

This morning saw two very strong housing reports:


First-time buyers lift U.S. home sales to 5-1/2-year high

WASHINGTON (Reuters) – U.S. home resales surged to a 5-1/2-year high in May as first-time buyers stepped into the market, the latest indication that housing and overall economic activity were gathering steam in the second quarter.

The strengthening economic outlook likely keeps the Federal Reserve on course to raise interest rates later this year.

The National Association of Realtors said on Monday existing home sales increased 5.1 percent to an annual rate of 5.35 million units, the highest level since November 2009. That put sales this year on track for their strongest gain since 2007.

“It suggests that the U.S. housing market recovery is back on track after the missteps earlier this year. We expect this upbeat tone in the housing recovery to continue as the favorable domestic fundamentals begin to reassert themselves,” said Millan Mulraine, deputy chief economist at TD Securities in New York.

New home sales hit 7-year high

(Time Magazine) – New U.S. single-family home sales increased in May to a more than seven-year high, further brightening the outlook for the housing market and the broader economy.

The Commerce Department said on Tuesday sales rose 2.2% to a seasonally adjusted annual rate of 546,000 units, the highest level since February 2008. April’s sales pace was revised up to 534,000 units from the previously reported 517,000 units.

Economists polled by Reuters had forecast new home sales, which account for 9.3% of the market, rising to a 525,000-unit pace last month.

Sounds good, but it’s actually just a response to interest rates looking like they want to spike. The yield on US 10-year Treasuries is up by 75 basis points since January, which inevitably means higher mortgage rates. And this month we got them:

Both buyers and sellers are viewing this trend with alarm. Buyers are terrified of being priced out of the market, so they’re stepping up and finally making offers. Sellers, meanwhile, are seeing previously-qualified buyers disappear in droves as higher rates raise the effective cost of home ownership. And realtors, you can bet, are working both sides of the market to fan these fears.

The result: sudden, widespread anxiety and lots of new contracts being signed.

This, of course, is a temporary situation. If rates go up from here, millions of first-time buyers (most of whom have student loans and/or are working as bartenders, waiters, or corporate temps and are therefore not mortgage-worthy at higher interest rates) will disappear. If rates stabilize here, the current sales spike will turn out to have been cannibalized from future demand, and a slowdown will ensue.

So the only way for housing to sustainably take off from here is for rates to plunge back to January levels — which would imply serious trouble elsewhere in the economy.

By Raul Ilargi Meijer
Website: http://theautomaticearth.com (provides unique analysis of economics, finance, politics and social dynamics in the context of Complexity Theory)© 2015 Copyright Raul I Meijer - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Raul Ilargi Meijer Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in