Home, sweet… or not so sweet, home.

I’ve commented in recent blogs about the threat rising interest rates pose to the economy.  In my last blog ‘Happier with less?’  https://christinemederaccountingadvisory.wordpress.com/2013/07/26/happier-with-less/ I point out that the housing sector is primarily responsible for the improvement in Consumer Confidence.  The recent earnings release from residential homebuilder D.R. Horton (DHI) confirms that one of the few bright spots in the economy is quickly fading.

In their Q2 earnings release DHI’s CEO commented that homebuyers are ‘shocked and disturbed’ by the rate jump, that DHI is disappointed that rates have risen so violently and that traffic count has slowed since rates rose.  The S&P Homebuilding Index is off 9% from its May highs since interest rates began rising making it among the worst performing sectors in the stock market recently.  Stocks are a good indicator of conditions six months down the road and this price action doesn’t bode well for residential real estate.  

With no meaningful improvement in employment or household income, rising interest rates will surely lead to a decline in real estate prices.  As seen below, there is generally a six month lag time from when interest rates begin rising until housing turns lower.  That means that by year end, housing prices should begin their trend lower in earnest.  2014 should be a horrible year for residential real estate.  If your business depends on real estate it is time to be preparing for the worst.  If the recent uptrend in prices  has lifted the value of your home to breakeven or slightly above cost, I reiterate my recommendation to put your home up for sale in what is left of the summer selling season and get the heck out of Dodge.

 

Are you seeing signs of real estate prices faltering in your neighborhood yet?

If you find my market insights beneficial and would like assistance with your accounting and investment activities, please contact me, Christine Meder at Christine Meder’s Accounting Advisory Services.  My email is mederchristine1526@gmail.com and you can tweet me at @christinemeder1.  I’m offering a free 30 minute consultation through the end of August.  #unrbrand

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About Christine Meder
Leveraging my insights and professional experience of 25 years in the accounting profession, I and my firm Christine Meder's Accounting Advisory Services provide our high net worth clients expert advice on their business activities and investments. In addition to performing traditional accounting functions in a confidential manner, I pride myself in giving clients a competitive edge whether it be in running their businesses or managing their investment portfolio. My studies leading up to completion of the EMBA program at the University of Nevada, Reno this August provide me with latest skills and techniques utilized across a broad spectrum of business functions. This breadth of education is complemented with experience as an accountant in the construction, mining, real estate and technology fields during my career. If you are looking for a trusted adviser or consultant in addition to someone you can rely on to properly keep your books, please contact me.

One Response to Home, sweet… or not so sweet, home.

  1. Pingback: Finger on the Pulse of Residential Housing Demand – Mortgage Applications | Christine Meder's Accounting Advisory Blog

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