Daily Gains Letter

U.S. housing


Profiting on Existing U.S. Home Sales Whether They Soar or Sour

By for Daily Gains Letter | Sep 23, 2013

U.S. Home SalesWhen it comes to the U.S. housing market, everything may look perfect on the surface, with homes being swept up at a rapid pace. However, this could all fall apart with the answer to one simple question: do existing-home sales numbers signal continued strength in the U.S. housing market and housing market-related stocks?

U.S. existing-home sales climbed 1.7% month-over-month to a seasonally adjusted annual rate of 5.48 million in August from 5.39 million in July. The year-over-year numbers are even more staggering, up 13.2% over the 4.84 million level in August 2012. While U.S. housing market sales are at their highest peak since February 2007, they are also above year-ago levels for the past 26 months (June 2011). (Source: “August Existing-Home Sales Rise, Limited Inventory Continues to Push Prices,” Realtor.org, September 19, 2013.)

Unfortunately, for many reasons, the party in the U.S. housing market might be short-lived.

In January, the interest rate on a 30-year fixed mortgage was around 3.41%; today, it’s 4.55%. While one percentage point might not sound like much, it translates into an increase of more than 30%. With mortgage rates on the rise, many first-time home buyers fear that affordability will be out of reach. (Source: “Average Mortgage Rates: January 2013,” MortgageNewsDaily.com, last accessed September 19, 2013.)

In an effort to do a runaround on rising interest rates, many first-time home buyers are jumping into the housing market. While interest rates are on the rise, it’s important to remember that they’re still well below the 6.48% level offered in August 2008, just before the housing market crashed. Still, the rise in interest rates was enough to … Read More