Strong demand and low inventory drive housing market in the face of rising mortgage rates

Despite rising mortgage rates, the US housing market remains strong due to high demand and low inventory. Home builders are responding by ramping up construction to meet the demand as existing inventory is near record lows. However, as mortgage rates continue to rise, there may be a slowdown in the market in the coming months. The spread between the yield on the 10-year Treasury and mortgage rates is wider than historical levels, suggesting that rates could come down in the future, potentially boosting the housing market. Builder financing is offering lower rates to entice buyers, but prices of new construction are not dropping yet. Starter homes are not the main focus of new construction, with builders concentrating more on the mid-market and luxury segments. The rental market is also seeing increased supply, leading to stabilization or even decreases in rents in some markets.