Two Housing Indicators to Follow Now
NEW YORK ( TheStreet) -- If you track the housing market closely, you are probably watching several indicators like a hawk, including existing home sales, new home sales, pending home sales and the Case-Shiller home price index.
But with rising rates threatening to dampen the housing recovery, you might want to add two more indicators to your list.
Bank of America Merrill Lynch economist Michelle Meyer in a report Friday highlighted two tools that could be useful to track the impact of higher interest rates on housing demand.
Weekly mortgage application volume is the "most timely and relevant," she wrote, with the data already showing a collapse in refinancing activity, which is typically more sensitive to interest rates. But the more important gauge of housing demand, purchase applications, has displayed a more choppy trend, rising 4.7% last week after declining 1.6% the previous week.The biweekly University of Michigan Survey is another good indicator, according to the economist. The survey asks respondents if it is a good time to buy a home. In May, 84% of the participants said yes, citing expectations of higher prices and also lower rates. Analysts are divided on whether rising interest rates could hurt the housing recovery. Some believe that the prospect of a further rise in rates might end up attracting more buyers who have been on the fence about buying a home. Meyer, however, says that the decisive move in interest rates may have caused a "payment shock." Some potential homebuyers may rethink their decision to purchase a home as they adjust to the idea of a higher monthly mortgage payment than they had originally expected. Still, confidence that the rise in price will continue, combined with still-high affordability could offset the impact of rising interest rates, ensuring that the housing recovery remains on track. -- Written by Shanthi Bharatwaj from New York >Contact by Email. Follow @shavenk
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts