There are houses for sale, but not nearly enough. There is high housing demand, but more potential buyers are struggling to afford down payments. Home price gains are accelerating. Homebuilders are not operating at historically normal production levels, nor are they shifting significantly to entry-level models.
Add all these current dynamics together, and the sum casts a long shadow over the U.S. housing market — and two more this fall could make matters even worse.
First, mortgage interest rates may finally move higher. Yes, they have been sitting at year-lows for nearly a month. Uncertainty in Washington over the president's economic agenda, as well as volatility in overseas markets have combined to lure investors to the relative safety of the U.S. bond market, keeping yields low. Mortgage rates loosely follow the yield on the 10-year Treasury.
There are, however, other factors that influence interest rates. For one, the Federal Reserve is heavily invested in mortgage-backed securities — supporting the entire market since the housing crash — but it is about to shed much of that.