Data released in October by the National Association of Home Builders (NAHB) showed that the U.S. NAHB Housing Market Index fell to 29 in October, below both the previous reading and market expectations of 32, and down to its lowest level since 2012. Builder confidence deteriorated more sharply than expected, directly reflecting the heavy pressure weighing on the foundations of the U.S. real economy.
The housing market has long been one of the forward-looking indicators most sensitive to the transmission of interest rates. Squeezed by high borrowing costs and sticky inflation, momentum in new home sales has rapidly dried up, while inventories have piled up and prospective buyers have become increasingly cautious. The sharp decline in this reading shows that the damage restrictive policy is inflicting on real demand is becoming increasingly evident, and recession concerns have not truly faded.
Traditional financial markets are on high alert in response to this signal. Housing activity has fallen to a more-than-decade low. Although this has lowered expectations for long-term Treasury yields in the short term, it has, in substance, heightened concerns about a “hard landing” for the economy. Tighter credit and the potential risk of corporate defaults could weigh on risk assets and drive demand for the U.S. dollar as a safe haven.
For crypto assets, deteriorating economic fundamentals are not an unequivocal positive. Although markets may price in a policy shift toward easing in advance, liquidity tends to flow out of high-risk assets first when risk aversion rises. Investors should be alert to the risk of a deep correction in major tokens such as $BTC amid liquidity pressures.
#HousingMarket #MacroEconomy #InterestRates
The housing market has long been one of the forward-looking indicators most sensitive to the transmission of interest rates. Squeezed by high borrowing costs and sticky inflation, momentum in new home sales has rapidly dried up, while inventories have piled up and prospective buyers have become increasingly cautious. The sharp decline in this reading shows that the damage restrictive policy is inflicting on real demand is becoming increasingly evident, and recession concerns have not truly faded.
Traditional financial markets are on high alert in response to this signal. Housing activity has fallen to a more-than-decade low. Although this has lowered expectations for long-term Treasury yields in the short term, it has, in substance, heightened concerns about a “hard landing” for the economy. Tighter credit and the potential risk of corporate defaults could weigh on risk assets and drive demand for the U.S. dollar as a safe haven.
For crypto assets, deteriorating economic fundamentals are not an unequivocal positive. Although markets may price in a policy shift toward easing in advance, liquidity tends to flow out of high-risk assets first when risk aversion rises. Investors should be alert to the risk of a deep correction in major tokens such as $BTC amid liquidity pressures.
#HousingMarket #MacroEconomy #InterestRates