U.S. mortgage rates dipped below 7% for the first time in over a month. At 6.94%, home buyers may enjoy a temporarily low rate. Banks need attractive mortgage rates to restart housing sales. Spring is normally the start of an active sales period. However, it is slower this year.
High home prices, low inventory, and high mortgage rates are headwinds for the housing market.
Investors may look at Redfin (RDFN) and Zillow (Z). Homebuilders like Lennar (LEN) backed down from recent peaks. LEN stock indicated a “double top” at $170, closing recently at $154.52. D.R. Horton (DHI) lost 5.4% in the last week to close at $142.82.
Inflation Data
According to the Fed minutes, policymakers looked for more evidence that the economy showed signs of inflation falling to 2.0%. Unfortunately, questions about its restrictive policy arose. The policy rate of 5.25% to 5.5% may not be sufficiently restrictive enough. Furthermore, U.S. fiscal policy such as the Inflation Reduction Act, student loan forgiveness, and infrastructure spending adds to inflation.
Bank stocks like Citi (C) or J.P. Morgan (JPM) have yet to pull back on the markets. Investors continue to expect a rate cut in 2024. Instead of watching banks, investors should watch the short-term U.S. Treasury yields. The six-month and three-month yields are at 5.38% and 5.39%, respectively. If they rise to 6%, it would pressure the stock market. The Nasdaq (QQQ) and S&P 500 (SPY) are especially vulnerable.
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