Interest rates and the housing markets
The US government’s ten-year yield (IEF) remained close to the 3% mark even after a minor pullback from the four-year high it saw in recent months. Bond (BND) yields are expected to increase further. The US Fed has clearly communicated its intentions to continue the rate hike path at the June monetary policy meeting, as the US economy continued to expand. The US Fed hiked interest rates by 25 basis points at that meeting and left the doors open for two more hikes in 2018. Rising interest rates increase the cost of owning a home for prospective buyers, but the impact hasn’t yet been felt by the housing (XHB) markets, as the recent economic data continues to paint a rosy picture for the housing sector.
Higher rates could impact housing markets
The 30-year mortgage rate increased to 4.8% in May, the highest level in the last seven years and a sharp increase from the mortgage rate of 3.6% in 2016. The rising interest rate is likely to impact the housing markets (REM), but rising wages, lower taxes, higher disposable incomes, and lower unemployment levels are helping prospective homeowners bear the higher interest rates.
This series will focus on the mixed economic data from the housing market in June and analyze trends in home builder (ITB) confidence, home prices, building permits, and new and existing home sales. In the next part of the series, we’ll discuss the National Association of Home Builders’ (or NAHB) report on builder confidence released in June.