Let’s discuss the recent positive trends in the bond market. In the last few days, we’ve seen a decrease in 10-year treasury rates and an increase in mortgage bonds. These developments suggest a reversal in the housing market, despite earlier claims of an impending housing bubble. Congratulations to those who reassured their clients and helped them capitalize on favorable deals amidst higher rates. The advice to ignore the bubble talk is proving to be accurate.
While different markets will always vary, national trends offer a comprehensive view. Let’s examine the gold standard indicators: Case Shiller and FHFA. Both indices measure genuine home appreciation and have recently reported encouraging numbers. Case Shiller has shown a modest 0.2% increase, breaking its downward trend since July last year, while FHFA has exhibited a 0.5% month-over-month growth. The market continues to show strength and resilience, despite bubble claims.
It’s important to consider that cash buyers, who make up 27% of the market, can negotiate lower prices. Case Shiller takes this into account, reflecting a meager 2.9% decline from the peak. The FHFA, however, disregards cash buyers and mortgages above conforming limits and is only down a negligible 0.2% from the peak. With these numbers, there is little cause for concern regarding a housing bubble.
We anticipate further appreciation in the coming year, particularly with the anticipated decrease in interest rates and a tight inventory of homes on the market. Some cities, such as Denver, LA, San Diego, and San Francisco, have already demonstrated a rebound, with new home sales in March surpassing expectations at 683,000 annualized units. The Conference Board’s consumer confidence index for April has yet to see a turnaround, but we remain optimistic.
As we progress, monitor key indicators, such as the 10-year treasury yield and mortgage bonds, to gauge market direction. While the media may continue to speculate on a housing bubble, the numbers suggest otherwise. Stay informed and continue to provide sound advice to your clients, helping them make the most of the thriving housing market.
