US: Home sales surging - Rabobank

Michael Every, Head of Financial Markets Research at Rabobank, notes that the US house sales surged, with the April report showing purchases up a staggering 16.6% m-o-m vs. just 2.4% consensus, though this is a very volatile series.

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It’s additionally true that US rate-hike bets have increased as a result of those data: the odds of a June hike are now back at 34% this morning and a July move at 53.8%, making it more likely than not.

Soaring new home sales, if sustained, back higher US rates. However, how higher rates are a positive for Asian equities ex-Japan is not so clear given the threat we have underlined day after day that higher USD = more downwards pressure on CNY, which has been seen by markets as bad news so far.

Likewise, one can argue that rising US rates are not good for US new home sales if that means higher mortgage costs…unless 10-year yields are not rising, in which case the signal remains that the Fed may be edging further down the path to a ‘policy error’.

Indeed, it’s also possible that sales might be surging as people listen to the Fed and decide “buy now while mortgage rates are low”. In that case, the rate hikes(s?) might be followed by a sudden drop-off in home sales, leaving the FOMC wondering where all that lovely pent-up demand suddenly went.”