A couple of months ago, during the subprime lending crash, the speculation was on whether the housing market would bring down the entire economy. So far it hasn’t. Does the housing market affect the stock market, and vice veras? The short answer is yes. But not completely. And there are other things about the housing market and the stock market that need to be considered. Lou Barnes at Inman News points this out:
Why isn’t housing knocking over the economy? The traditional reasons are lost on Wall St.: if you don’t have to sell, don’t sell. Live in it. If your value doubled since 2001, and you’ve lost 5 pecent, you still have a 95 percent gain. The foreclosure pain is confined to late-comers with bad loans — it’s very painful for them, but confined. So far.
The real story right now in terms of the housing market is a little closer to home: interest rates. Mortgage rates are on the rise, following rising Treasury note interest rates. Mortgage rates are known for moving up as the yield on the 10-year T-note moves up. This means that if you have a variable rate mortgage, it is about time to steel yourself; it’s about to go up. And looking for new financing is probably going to hit you in the wallet too.
An accelerating global economy, along with stock prices that haven’t been terribly affected by the housing market, are cases for increased monetary tightening around the world, and that means higher interest rates here at home as well.