![]() Florida, Texas, Nevada, and other states attracted migration from New York, California, Illinois, and other high-income tax states.Īs interest rates began rising in 2022 and throughout 2023, the demand for housing cooled. States with no or low income tax experienced migration and a new home construction boom. Moreover, working from home presented new opportunities as commuting was no longer an obstacle for many buyers. Money was free, with mortgage rates under 3%, and buyers watched as home prices soared each month. While the 2020 pandemic caused many financial problems, it ignited a furious rally in the housing market. The pandemic buying spree ended - New home construction suffered but came roaring back Meanwhile, new home sales rose in July 2023, beating estimates and rising to a 17-month high as buyers had to turn to new construction, given the historically low supply of existing homes. ![]() Existing home supplies have dropped, keeping prices high, while new home mortgage rates are at the highest levels in years. The situation could not be worse for buyers looking to purchase their first home. Therefore, the supply of existing homes for sale has declined. Moreover, given the explosive move in mortgage rates, homeowners who refinanced or purchased homes over the past years with 3% or lower mortgages have no incentive to sell their properties and move. Since the end of 2021, rising interest rates caused the monthly payment on a conventional $400,000 mortgage to rise more than $1,300, excluding many potential buyers from the market. The rising Fed Funds rate, quantitative tightening to reduce the central bank’s swollen balance sheet, and inflation well above the Fed’s 2% target level pushed the mortgage rates over 7% in September 2023. In January 2021, the rate fell to a record 2.65% low. In late 2021, a conventional 30-year fixed-rate mortgage was below 3%. Rising interest rates have been bad news for home borrowers However, when they remain stable or decline or move in a contrary direction, NAIL and other leveraged products can quickly lose value. The cost is time decay, as products like NAIL offer turbocharged returns when the underlying assets move in the anticipated direction. NAIL employs options and swaps to create leverage. NAIL is a leveraged ETF product that increases profit potential, but the cost in a far higher risk level than non-leveraged instruments. The Direxion Homebuilders & Suppliers 3X ETF product ( NYSEARCA: NAIL) has been nailing profits since the Home Construction Index made another higher low in October 2022. The stock market has been fighting the Fed over the past months, and the Home Construction Index ignored increasing rates, making higher highs over the past months. ![]() Since June 2022, the index has taken off on the upside, reaching a new record peak in June 2023, even though rates continued to climb. Rising prices caused the Fed to increase interest rates in March 2020, and the index fell 40.8% to a higher 8,784 low in June 2022. However, the market for new construction cooled as the Fed realized rising inflation was a structural issue and not the result of pandemic-inspired supply chain factors. interest rates to zero percent and a tsunami of government stimulus programs caused the index to explode 228.3% higher to a 14,839.16 peak in late 2021 as thirty-year conventional fixed-rate mortgage rates sat below the 3% level. The tidal wave of central bank liquidity driving short-term U.S. Select Home Construction Index (Dow Jones)Īfter rising to a record 8,947.33 high in February 2020, the index plunged 49.5% to a 4,520.63 low on March 20, 2020. Select Home Construction Index plunged in early 2020 as the global pandemic gripped markets across all asset classes.Ĭhart of the Dow Jones U.S.
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