REIT - Housing Market Deterioration
Summary
- Housing starts data notwithstanding, here’s why we think the US housing market deterioration will have a downside acceleration following what has been a surge in valuations.
- Spreads are widening while rates are rising.
- The results are simple. Housing may be in trouble and worsening.
Housing starts data notwithstanding, here's why we think the US housing market deterioration will have a downside acceleration following what has been a surge in valuations. The two charts show the spread of 15-year and 30-year mortgage rates to the benchmark 10-year US Treasury note. Remember that all rates are much higher than a year ago. The point is that spreads are widening while rates are rising. That's a bad combination. Also note that the spreads are now higher than the pre-Covid levels.
The results are simple. Housing may be in trouble and worsening. We have no sector exposure in housing in our US Equity ETF strategy. We're currently 47%-48% in cash and equivalents. Of course, that can change at any time.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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Housing Market Deterioration