NAHB Housing Market Index is bad and could get even worse.

The National Association of Home Builders (NAHB) Housing Market Index for October was 38 vs an expectation of 43 and a September print of 46. This was the tenth straight monthly decline. With exception to the spring of 2020 when the coronavirus had much of the world on lockdown, this was the lowest reading since August 2012! Current sales conditions fell to 45 from 54, sales expectations over the next 6 months fell to 35 from 46 and traffic of perspective buyers fell to 25 from 31! The primary reason for the overall drop was due to higher interest rates combined with high housing prices. For reference, the MBA 30-year Mortgage Rate was 6.81% last week, the highest since June 2006. Notice in the chart below the similar rate of decent between the mid-2000s and now. If this number continues to drop at the same pace, it may be foreshadowing a recession. And why shouldn’t it continue to fall? If inflation continues to rise, mortgage rates should continue to rise as well.

Source: Trading Economics

However, there is room for a pullback in 10-year yields. The benchmark yield has been rising in a wedge formation since August 2^nd. Yields are not only approaching the apex of the wedge, but also the highs from October 2008 at 4.085%. If yields break above, the next level of resistance is at the top trendline of the wedge and the 127.2% Fibonacci extension from the highs of June 16^th to the lows of August 2^nd near 4.14%. Above there, yields can move to the 161.8% Fibonacci extension from the same timeframe and the highs from December 2007 near 4.29%, The third level of resistance is the November 2007 highs at 4.47%.

Source: Tradingview, Stone X

However, notice that yields are diverging with the RSI, an indication that yields may be ready to pull back. If the resistance holds, first support is at the bottom trendline of the wedge near 3.85%. Below there, yields can fall to the 38.2% Fibonacci retracement from the lows of August 2^nd to the highs of October 13^th at 3.48%, which is also near horizontal support mid-June. The next support level is the 50% retracement near 3.30%.

Source: Tradingview, Stone X

In the mid-2000’s, the NAHB Housing Market Index dropped dramatically, similar to what is happening today. Could this be a foreshadowing of a recession? With the Fed continuing to raise rates, yields on longer-term bonds should rise as well. But for right now, 10-year yields are diverging with the RSI and running into resistance. Perhaps they pull back first.

StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Europe Limited, and FOREX.com/ie is a domain operated by StoneX Europe Ltd, a member of StoneX Group Inc. StoneX Europe Ltd, is a Cyprus Investment Firm (CIF) company registered to the Department of Registrar of Companies and Official Receiver with a Registration Number HE409708, and authorized and regulated by the Cyprus Securities & Exchange Commission (CySEC) under license number 400/21. StoneX Europe is a Member of the Investor Compensation Fund (ICF) and has its registered address at Nikokreontos 2, 5th Floor, 1066 Nicosia, Cyprus.

StoneX Europe Limited is registered with the German Federal Financial Supervisory Authority (BaFin). BaFin registration ID: 10160255

FOREX.com is a trademark of StoneX Europe Ltd, a member of StoneX Group Inc.

The statistical data and the awards received refer to the Global FOREX.com brand.

This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy.

Through passporting, StoneX Europe is allowed to provide its services and products on a cross-border basis to the following European Economic Area ("EEA") states: Austria, Bulgaria, Croatia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden.

Additionally, StoneX Europe Ltd is allowed to provide Investment and Ancillary Services to the following non-EU jurisdiction: Switzerland.

StoneX Europe Ltd products, services and information are not intended for residents other than the ones stated above.

Tied Agent Information: KQ Markets Europe Ltd with Company No. HE427857.
Address: Athalassas 62, Mezzanine, Strovolos, Nicosia Cyprus.
Services Provided: Reception and Transmission of Orders.
Commencement Date: 06/12/2022
Website: KQ Markets - CFD Trading | KQ Markets

We may pay inducements, such as commissions or fees, to affiliates or third-party introducers for referring clients to us. This is in line with regulatory guidelines and fully disclosed where applicable.

StoneX Europe Ltd may make third party material available on this website which may contain information included but not limited to the conditions of financial markets. The material is for information purposes only and does not contain, and should not be construed as containing, investment advice and/or investment recommendation and/or an investment research and/or an offer of or solicitation for any transactions in financial instruments; any decision to enter into a specific transaction shall be made by the client following an assessment by him/her of their situation. StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.