Homebuilder sentiment slid at the start of May according to the NAHB, marking the fifth straight monthly decline. Housing remains a key barometer of the broader economy. It is no coincidence that the steep fall in homebuilding sentiment at the start of May has coincided with a plunge in consumer discretionary shares (6.6% yesterday). The drop in home improvement stocks adds to the signals that the housing market is slowing sharply.
Mortgage applications for purchase tumbled 11.9% in the week ending March 13th, taking the index down to a two-year low. The steep rise in rates and record house price growth is forcing a reckoning amongst homebuyers.
The surge in the value of real estate assets and equities since the onset of the pandemic contributed to a significant wealth effect for households. The slide in cryptocurrencies, technology stocks, and now the potential for a correction in house prices, threatens to provide further impetus to the current equity market sell-off.
Worldwide, overvalued property markets are beginning to deflate, which will add a sting in the tail of the bear market in technology stocks. The weaker housing data are no doubt contributing to the rally in Treasuries. The 10-year Treasury yield fell to 2.784% today, down from as high as 3.007% yesterday morning.
