The Food Is Terrible And The Portions Are Small

Housing Market Commentary

Interest rates are a key factor in home buying decisions, so it should be no surprise that existing home sales peaked the same month mortgage rates bottomed. There is some debate over this cause and effect. Those actually in the market to buy a home say the reason home buying slowed is that supply has dried up and prices are unattractive. It reminds me of the old restaurant joke: the food was terrible and the portions were small. So, what do you think? Is it supply or interest rates affecting the trend in Existing Home Sales?

My own view is that interest rates play a very strong part in the decision to buy a house. The reason for that is that the typical home buyer is buying a monthly payment; in other words, what can they afford and how does it compare to rent? A higher interest rate means a higher monthly payment for the same house price, or less buying power from the home purchaser. It doesn't seem like we've had a significant move in mortgage rates, but boy, the market timing is suspicious!

Robert Lloyds, CFA®

Chief Investment Officer

Lloyds Intrepid Wealth Management

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