Thursday, December 1, 2016

Is A Housing Slowdown in the Cards?

The chart above plots three sets of data: the 10 year CMT treasury (in blue), the 15-year mortgage rate (in red) and new home sales (in green).

Note that as the blue and red line declined from the beginning of 2014 new home sales rose.  This is an easily explained relationship: lower interest rates lead to lower financing costs, increasing overall housing demand.  But interest rates have sharply increased since the election.  Just as low rates stimulate demand, expect higher rates to lower it.