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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (7113)	5/26/2004 1:57:12 PM
From: CalculatedRisk	Respond to of 116555

Housing: In April, the average 30 year loan was 5.83% up from March's 5.45%. In May the 30 year is around 6.3%; its highest level in two years (last August was close). When we look at the New Home Sales this month, we see that a small increase in interest rates (5.45% to 5.83%) led (at least partially) to an 11% drop in seasonally adjusted sales. That is stunning. What will happen in May with rates at ~6.3%? There is evidence of some "panic" buying to avoid even higher rates. There is also evidence that inventories are building (4.3 months in this report) for both New Homes and Existing Homes. I expect to see the number of months of inventories to really jump over the summer. Still, prices set new records: Median was $221,200 and the average was $270,400. The largest dropoff in sales was in the South where homes are cheaper. This can explain part of the increase in prices; that fewer cheap homes were sold. A very interesting report. I've felt that rates between 6.5% and 7% would choke off the market. This report shows that the slowdown may occur at even lower rates. Best to all.