Housing Market Slowing?

Mortgage bonds are near flat on the day so far, as bond investors wait for the stock market to decide on its direction.  As expected, stocks closed above their 200 day moving average on Friday.  Since it has been years since stocks have decisively been below this critical moving average, we can anticipate stocks to climb higher in the near-term.  However, eventually there will come a day when the stock market falls below its 200 DMA.  Could that day be soon?  Although the market is showing signs of growing tired, I don’t believe the time is now.  If I am wrong, however, and stocks fall in the near-term, we will likely see mortgage interest rates improve.  Since a breakout is the exception and not the rule, we shouldn’t plan on that anytime soon.

In other news, Retail Sales for the month of September came in at just 0.1%, which was well below the 0.6% gain the market was anticipating.  This shortfall was widely due to lower than expected auto sales.  Since this is a critical indication of economic growth, it is concerning to see such a low report.  However, with the Christmas season around the corner, this will likely tick higher in the months to come.

With average mortgage interest rates now as high as they have been since 2011, consumers are having a difficult time adjusting to a 5% range mortgage.  This is helping to attribute to concerns over a slowing housing market.  A “shift” from a seller’s market into a neutral market is now underway, with expectations of a buyer’s market coming.  Now is a great time to sell.

Given the continued weakness in the bond market, we will maintain a locking bias.