We have been talking about tighter financials conditions (higher rates, higher yields, tougher lending, etc.) and the theme of demand destruction (how the Fed is attacking inflation) for the past several months. Higher yields don’t just hit the US Treasury bond market – they hit mortgage rates too. The median mortgage in the US is now paying 80% more per month in mortgage payments versus a year ago (assuming comparable mortgage size and a new purchase). That’s A LOT.
The combination of tighter financial conditions and targeted demand destruction has finally hit the housing market. Pending sales index lower, pending house sales lower, existing house sales lower. Housing inflation is headed lower, yields are headed lower, and all ears should be poised to hear the magic words uttered by the Fed chair sometime this fall: “we’re pausing on further rate hikes”.
Richard Barrett
Chief Investment Officer
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