NEW YORK (Real Money) -- Maybe interest rates on U.S. Treasuries just went too high to begin with? Maybe the real flaw with our view on interest rates is that, in retrospect, the summer 2013 rise was an overreaction to the potential end of the government's bond-buying -- and that the 10-year should not have gotten as close to 3% yield as it did.
That's probably the most important conclusion that came out about housing in Tuesday's Home Depot (HD) conference call. Given that nobody has a pulse on homeowners, homebuilding and home remodeling like CEO Frank Blake does, I have to take it as gospel that he is right.
We all accept that rates now have a desire to go lower. We have all sorts of different interpretations why that is: supply that's not as big, foreign buying, bigger tax receipts, a slowing demand.
But Blake is the first one to single out the anomaly of the rate rise and how it really crimped one of the great comeback engines of our economy. "Mortgage rates," Blake pointed out, "took a pretty significant jump up in the summer of 2013, and you saw a not-surprising response to that in the housing market." He felt that the other surprise was the "strong housing-price appreciation" notwithstanding that rate increase.
Now, Blake reiterated that housing is still affordable even after this run. He also pointed out that his key metric for sales growth is, indeed, that appreciation -- because people keep spending on their homes as they appreciate, as it is a terrific capital appreciation.