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What Are the Declining Homebuilder Stocks Trying to Tell Us?

88 views  2013-07-02 23:22   Tagscertainly  situation  positive  economic  blank 

One of the few positive sectors within our economy over the past year has been the housing market. Even though economic growth overall has been less than optimal, the housing market rebound has certainly helped improve the overall situation.

With comments by the Federal Reserve that they’re preparing to reduce their monthly asset purchase program, investors reacted abruptly and sent interest rates shooting up over a very short period.

Over the past few weeks, rates from 15-year to 30-year mortgages have gone up approximately 0.5%. Can the housing market sustain its growth trajectory in the face of higher mortgage rates?

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Historically speaking, we are still at very low levels when it comes to mortgage rates. However, the psychological affect of the rapid rise might begin to become a slight drag on economic growth.

The housing market comprises many variables, and interest rates are just one of them. Incomes, we know, are not rising rapidly, but the housing market inventory is extremely tight. That dichotomy has been bullish for home prices so far, but at some point, higher interest rates will begin to become a larger factor.

Because the overall economic growth of America is still relatively weak, if rates continue rising, this would have an impact on the housing market.

Continue Reading: What Are the Declining Homebuilder Stocks Trying to Tell Us?

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