Will Housing Be The First Domino To Fall?

Early this week, the market shook off Thanksgiving blues and started with a bang!

Stocks bounced sharply, and Treasury yields moved up in tandem.

Last week’s start was a different story.

Stocks fell sharply. Treasury bonds were mostly steady; despite the sell-off in stocks, they didn’t rally much on the long end of the yield curve.

There was a persistent move to the safety of bonds, but that didn’t match the sharp sell-off in stocks.

A rumor last Wednesday, that the Fed might be considering an early 2019 pause to its current plan to rate hikes – up to four times more –helped stocks bounce off levels from the day before. Long-term Treasury bond yields also rose.

After all, was said and done, the markets ended the day before Thanksgiving mostly unchanged. They ended Black Friday lower again while long-term Treasury yields hovered around 3.30%.

The Fed is focused on “normalizing” interest rates.

The markets are focused on holiday sales forecasts.

I’m focused on the state of the housing market.

The Housing Dilemma

New home sales are crucial to our economy because of the ripple effect they create for builders, mortgage servicers, real estate brokers, and home-furnishing retailers.

This morning, new home sales for October were expected to rebound, but disappointed… yet again.

The consensus estimate was a rebound to 575,000 annual rate. The actual was a measly 544,000.

The only good news out of this is that September sales were revised higher by over 40,000 units.

October existing home sales figures have disappointed consensus estimates for six months in a row now, and I don’t expect a turnaround anytime soon.

Existing home sales are a much larger share of the housing market, but are less important to the broader economy. They do, however, give us a good look at overall housing trends.

The seasonally adjusted sales figures were slightly ahead of estimates on the month. The year-over-year figures slightly declined to -5.1% from September. Single-family home sales were down 5.3%, while condo sales were down 3.2%.

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