NEW YORK ( TheStreet) -- Despite the focus on the labor market, it's the housing sector that could suffer the most if the Federal Reserve raises rates.
Sales of new single-family houses declined 2.4% in July from a month earlier, the Commerce Department said Monday. The disappointing figure brought down SPDR S&P Homebuilders (XHB) and iShares Dow Jones US Home Construction (ITB) .
New-home sales broadly declined from 2005 to 2011, and although they have picked up since 2011, higher mortgage rates and lackluster wage growth have curtailed growth.
Mortgage rates began to fall in 2008 as a result of the Fed slashing short-term rates and pumping liquidity into the economy as a way to combat the financial crisis. Last year, the Fed announced it was looking to end its stimulus program, which prompted a spike in mortgage rates.
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Since then, the 30-year mortgage rate has stabilized above 4%, causing the cost of home buying to jump. Meanwhile, lackluster U.S. wage growth has also held back home buying.
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