Financial Market

This is “Anything but Positive for Housing” :: Elliott Wave International

A tug-of-war between bullish and bearish forces appears to be playing out in the U.S. housing market.

On the one hand, some areas of the country are still experiencing record-high home prices as buyers outnumber sellers.

On the other, the number of home sellers who dropped their asking price spiked to a six-month high of 15% during a four-week period ending on May 1, according to a Redfin report released on May 6.

Another development that falls in the bearish category for residential real estate is rising mortgage rates.

Here’s what our April Elliott Wave Financial Forecast noted as it showed this chart:

Mortgage

The rising interest-rate story is anything but positive for housing. This chart shows a surge in the cost of financing a home. Over the last 15 months, the Freddie Mac 30-year mortgage rate rose from a record low 2.65% to 4.67%, a 76% increase… As the chart title suggests, mortgage rates have much higher to go.

In fact, about a month after that commentary published, a May 9 Fox Business news item said:

The 30-year fixed-rate mortgage surged to 5.27% annual percentage rate (APR) for the week ending May 5, 2022, according to Freddie Mac…

That’s the highest 30-year fixed mortgage rate since 2009.

As the Campbell Real Estate Timing Letter noted (May 15):

In April 2022, a $1,000 principal and interest mortgage payment currently affords a loan that is 30% smaller than at the beginning of 2021.

Now, let’s mention another bearish factor for U.S. housing — and that’s the action of the stock market.

You see, the stock and real estate markets tend to be highly correlated. They may not be in perfect synchronization, but generally, they both tend to rise and fall together.

And, as you probably know, the Dow Industrials and S&P 500 index have been in a downtrend since January.

Get our latest Elliott wave analysis of the stock market — as well as our specific outlook on interest rates (or bond yields) — by reading our flagship Financial Forecast Service.

Click on the link below to get started.

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