Leading Housing Indicator Falls
The Mortgage Bankers Association for the 6/22 week reported that Purchase Applications for homes fell on a seasonally adjusted basis 6% from prior week and rose only 1% vs last year. This index is weekly and is fairly volatile so the importance of any given weeks stats isn't high. However, as we have shown the rise in rates recently when correlated with purchase activity supports housing to weaken considerably going forward. Offsetting rates is better economic activity and with it hopefully higher wages so higher rates aren't all that bad. Despite the short-term trade noise which if sorted out should produce even higher economic activity in the US supports the trend of higher mortgage rates. We still believe like others that the Federal Reserve will continue to boost rates 2 more times this year and 2-3 next. Thus, why we continue to caution businesses related to housing to be more reserved when considering risk and leverage this late in the economic cycle. Creating a model & forecast for your business provides a mechanism to better plan and do scenario analysis on demand for housing weakens.
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