It’s not difficult to find reasons to expect an imminent housing market crash. For example, the 30-year mortgage interest rate hovered near 8% not long ago. This has made new homes unaffordable for many Americans. Furthermore, mortgage application volume is down, and some sellers have reduced the list prices on their homes. Now, there’s another worrisome update to add to the list.
Experts with the National Association of Home Builders (NAHB) and Wells Fargo Housing just released some data that might get investors worried. Previously, Wells Fargo economists hinted that a real estate market recession is coming. The latest data seems to reinforce this point, and there are implications for many U.S. stock investors.
Housing Market Crash
Here’s the rundown. Based on information from the National Association of Home Builders (NAHB) and Wells Fargo Housing, the Homebuilder Confidence Index came in at its lowest level so far in 2023. This index was at 40 in October. Moreover, economists expected to see it tick down to 39 in November.
However, the actual print for the Homebuilder Confidence Index in November was 34. This marks the third consecutive month in which the index was below the breakeven point of 50.
On the other hand, the update wasn’t all bad. Robert Dietz, chief economist with the NAHB, assured:
“While builder sentiment was down again in November, recent macroeconomic data point to improving conditions for home construction in the coming months.”
What recent macroeconomic data was Dietz referring to? Specifically, “[T]he 10-year Treasury rate moved back to the 4.5% range for the first time since late September.” This, he added, “will help bring mortgage rates close to or below 7.5%.”
What You Can Do Now
If high mortgage interest rates are putting homebuilders in a bad mood, maybe an easing of interest rates will improve the situation. However, it’s difficult to predict the future course of interest rates.
Ultimately, there’s no need to sell your home or stocks out of fear of a housing market crash. However, since the future is uncertain and there are troubling data points, it makes sense to invest wisely.
Specifically, it’s not a terrible idea to cut back on stocks like Realty Income (NYSE:O) and Rocket Companies (NYSE:RKT). Those are two examples of real estate stocks that could put your portfolio at risk.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
