Home Sales Rise - Lifting Interest Rates

The National Association of Realtors (NAR) announced that pending sales of existing home rose 3.60% in June, recording a fifth straight monthly gain. NAR's Pending Home Sales Index (PHSI) is released during the first week of each month and is designed to be a leading indicator of housing activity.




The latest news on housing activity caused the price on 10-Year Treasury Notes to drop, sending yields to their highest levels in more than six weeks. As the price of Treasury Securities falls, the yield increases; which is reflected in an increase in mortgage interest rates. Typically positive economic data of this nature will result in a "sell-off" of securities, causing the price to drop and rate to increase.



It is very important to understand that the 10-Year Treasury is NOT the leading indicator of mortgage rates. Mortgage professionals monitor the activity of the 30-Year Treasury Bond; however, the 10-Year is often quoted in news releases and it's activity is readily available in general market reports. The 30-Year Bond was trading significantly lower on the housing data.



Overall, the housing data is viewed as an indication that the struggling U.S. housing market may be reaching its bottom level. Furthermore, this news may be a sign that home prices will be back on the rise soon as inventory shrinks. It is quite possible that we may see a "sellers" market again in the near future; the time to buy is now while home prices and interest rates enjoy lower levels.