This is Anything but Positive for US Housing Market
Housing-Market / US Housing May 17, 2022 - 04:50 PM GMTBy: EWI
Has the rise in mortgage rates only begun?
A tug-of-war between bullish and bearish forces appears to be playing out in the U.S. housing market.
On the one hand, some areas of the country are still experiencing record-high home prices as buyers outnumber sellers.
On the other, the number of home sellers who dropped their asking price spiked to a six-month high of 15% during a four-week period ending on May 1, according to a Redfin report released on May 6.
Another development that falls in the bearish category for residential real estate is rising mortgage rates.
Here's what the April Elliott Wave Financial Forecast, a monthly publication which provides analysis of major U.S. financial markets, noted as it showed this chart:
The rising interest-rate story is anything but positive for housing. This chart shows a surge in the cost of financing a home. Over the last 15 months, the Freddie Mac 30-year mortgage rate rose from a record low 2.65% to 4.67%, a 76% increase. ... As the chart title suggests, mortgage rates have much higher to go.
In fact, about a month after that commentary published, a May 9 Fox Business news item said:
The 30-year fixed-rate mortgage surged to 5.27% annual percentage rate (APR) for the week ending May 5, 2022, according to Freddie Mac. ...
That's the highest 30-year fixed mortgage rate since 2009.
As the Campbell Real Estate Timing Letter noted (May 15):
In April 2022, a $1,000 principal and interest mortgage payment currently affords a loan that is 30% smaller than at the beginning of 2021.
Now, let's mention another bearish factor for U.S. housing -- and that's the action of the stock market.
You see, the stock and real estate markets tend to be highly correlated. They may not be in perfect synchronization, but generally, they both tend to rise and fall together.
And, as you probably know, the Dow Industrials and S&P 500 index have been in a downtrend since January.
Now is the time to pay close attention to the Elliott wave structure of the stock market, which, as mentioned, can help you get a handle on the housing market.
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This article was syndicated by Elliott Wave International and was originally published under the headline This is "Anything but Positive for Housing". EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
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