The housing market is flashing warning signs. The Federal Reserve is considering more rate hikes. One of these parties is a doctor. The other is the thing making you sick.
Housing data got worse in September. Two separate reports said so on Tuesday. Two. Separate. Reports. That's the financial press's version of getting a second opinion, except both doctors read the same chart and yelled at the same patient.
Here is the Fed's logic. Homes are too expensive and mortgages are too costly, so the cure is making mortgages costlier. It's like treating a drowning man by raising the ocean.
Jerome Powell has a dual mandate. Stable prices and maximum employment. He has now added a third: personally ruining the Saturday open house.
Retail traders will respond the way they always do. They will buy homebuilder ETFs because the chart looks "oversold." Oversold is a word that means someone already sold it to you.
Technical analysis offers a clear read here. The line goes down. Sometimes it goes up. I have a chart for this and the chart is a drawing of a shrug.
Somewhere a 29-year-old with a 7 percent mortgage quote is refreshing Zillow like it owes him money. It does not. Zillow owes him nothing. Zillow is a website that shows you a kitchen you cannot afford, and it does so for free.
The Fed weighs more hikes. Housing weakens. The Fed sees weakness and weighs more hikes. This is called a feedback loop, or as it's known in my house, a marriage.
Buy a home now or wait? Wait. Wait for what? For the thing you're waiting for to be someone else's problem.
Your starter home will cost $450,000 and come with a raccoon in the attic. The raccoon will have better equity than you.
Photo by Erik Mclean on Unsplash
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