The recovery of the U.S. housing market has been one of the most encouraging economic stories in the world in recent years.
But the recent jump in mortgage rates — even as prices rise — have some concerned that we’ll lose buyers as affordability falls.
Unfortunately, the recent data does not support those worries.
From Credit Suisse’s Neal Soss:
Rising mortgage rates have done nothing to slow down momentum in home buying, in our view. If anything, this may be propelling those sitting on the fence. June existing home sales should hit the highest non-homebuyer tax credit level in six years. June new home sales should rise to a five-year high.
Measures of home buying and home selling conditions from the University of Michigan’s consumer survey have been signaling for some time a run-up in existing home sales. We could see another 4% plus bounce in June. Pending home sales, which lead existing sales by a month or two, were up over 6% in May. The downside risks to this forecast continue to be tight lending conditions and inventory constraints.
New home sales should be up a tad in June. Single-family building permits, source data for new home sales, rose 0.6% in June, to the highest level since May 2008. Similar to existing home sales, inventory constraints continue to limit the upside for new sales. But higher traffic of prospective home buyers suggests pent-up demand and a further recovery in coming months.
Of course, it’s too early to make conclusions in either direction.
But for now, it looks like the demand side of the housing market will remain healthy as buyers waiting for the best deals suddenly come off of the sidelines.
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