When it comes to the housing market, there are those who always try to portray the glass as half full. There is a point to agree on. The glass is fuller than last month.
Before we go any further, a disclaimer. A perfect measure of the health of the housing market is still not great. We know it, and we’ve been arguing about it for most of the year as sales have declined and fees have skyrocketed. That part is old news.
The new news is that there are some signs of change. If things were to continue to change like they have in the last few weeks, people would really be talking about a recovery in the housing market.
In another article, we discussed a potential bounce in new home sales versus pending home sales.
As we’ve discussed in detail over the past few weeks, the rates are actually much better than they were 3-4 months ago. But the level of improvement is probably not even the most welcome change. Rather, it’s stability. Ranged just above 0.5% for over three months, interest rates have not shown a tighter stable range since late 2021.
Interestingly, this combination of lower interest rates and more stable interest rates aligns perfectly with the notable change in purchase mortgage applications. Purchase apps reached his highest level since August this week.
One big lesson I’ve learned from the past year (and many times in the history of market watching) is not to draw blanket conclusions about the future from months of data. Could interest rates rise again and house prices return to previous levels? Of course. All we are saying is that the housing market will rebound at some point, and the beginning of such a rebound looks a lot like the chart above.
But be careful. Over the past few years, housing has played a very large role in driving inflation. The Federal Reserve recognizes that. If the market seems to be rebounding too quickly, it’s entirely possible that the Fed will do or say something to keep things from getting worse.
Ultimately, broader economic factors will play the largest role in determining the trajectory of interest rates (inflation, employment, indicators of economic output, etc.). Several high-priced economic reports are due next week, along with the Fed’s latest policy announcement. Forecasters and markets have already placed bets on what that data will look like. All we know is that it could be more volatile than it was this week, for better or worse.
