Friday, January 10, 2014

New Homes Sales vs Interest Rates - opposite direction...

The rise in interest rates may be a challenge for the real estate market in 2014, (although I have to point out: this is nationwide):

  • During 2013, increases in mortgage rates corresponded with declines in home buying, and in light of shifts in the Federal Reserve’s monetary stimulus effort, the trend is expected to continue.
  • When the Fed first announced it would consider scaling back its bond-buying program, mortgage interest rates spiked in May. As a result, the seasonally adjusted annual rate of new home sales dropped by 4 percent from the prior month.
  • In contrast, mortgage rates dropped by three-tenths of a percentage point during October just as new home sales surged 18 percent.
  • In mid-December, the Fed announced that it will begin tapering its asset purchase program, but the Fed is only reducing its monthly buys of mortgage securities and Treasuries by just $10 billion.
-  If mortgage interest rates increase a little, some analysts have stressed that any such rate increases will see the recovery slow rather than reverse.
  • The interest rate on U.S. Treasury notes is also increasing, which could signal higher interest rates ahead because it is used as a reference point for the cost of borrowed money for U.S. consumers and businesses.

See the corresponding graphs on this page of the Wall Street Journal.

Thanks for reading,

Silicon Valley real estate specialist
Detailed, local trends etc...
Current mortgage rates

non-profit organization worth noting: Partners for New Generations.

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