More Signs of Housing Slowing?

Mortgage bonds are weakening after failing to break above the Fibonacci level that prevented interest rates from further improvement. Unfortunately, they are now once again beneath their 100-day moving average. It has been nearly a year since bonds have convincingly held above this critical moving average, so it’s no surprise that they were forced back beneath just days after breaking above. Overall, this is not a good sign for the near-term direction of mortgage interest rates. We could see additional upward pressure as the days move on.

After many months of strong growth, New Housing Starts are beginning to flatten. This is having a short-term impact of having home values pressured higher. However, the higher prices seem to also be deterring potential home buyers from making the leap. At the same time, Existing Home Sales are slowing, as fewer buyers are willing to pay the current price of a home along with the higher interest rates we’ve seen in 2018. These are moves we typically see as the housing market approaches a peak in its current cycle. Further supporting this is the recent increase in the number of foreclosed properties hitting the market. With foreclosures on the rise, we could see more homes available, which could help slow the pace of home value appreciation. The months to come will be critical to watch to see if the markets correct or if the slow-down accelerates.

Given the current pressures on the bond market, we will maintain our locking stance.