Money Morning Capital Wave Strategist Shah Gilani talked with FOX Business' "Varney & Co." today (Tuesday) about a huge red flag in the housing recovery.
Shah has found that we may be on the cusp of a double-dip in home prices.
How Higher Mortgage Rates Will Dent Housing's Recovery
How much do higher mortgage rates reduce home sales?
That, of course, depends on how much rates rise and whom you ask. But there's no doubt higher mortgage rates hurt sales, experts say.
Interest rates have been climbing since May. Rates on 30-year, fixed-rate mortgages averaged 4.37% for the week ending July 18, Freddie Mac's weekly survey of conforming mortgage rates said. That's up more than a percentage point from early May.
And existing home sales fell 1.2% in June, to a seasonally adjusted annual rate of 5.08 million, from 5.14 million in May (but still 15.2% higher than in June 2012), the National Association of Realtors said Monday.
Lawrence Yun, the NAR's chief economist, told Money Morning he expects interest rates to hit 5% to 5.5% within a year. And while he foresees existing home sales rising as much as 10% for 2013, he predicts only a single-digit percentage increase next year primarily because of higher mortgage rates.
"There's no risk of any reversal of this housing recovery; it's just slowing the pace of this housing recovery," Yun said.
He said robust demand and affordable prices would lessen the impact of the higher mortgage rates in much of the country, but pricier markets in New York, parts of California and Hawaii would be hit harder by the higher mortgage rates.
Will the Home Mortgage Interest Deduction Vanish in 2013?
In 2013, Congress is expected to explore a number of tax reforms in order to address staggering deficits and a crippling $17 trillion in debt owed by the Federal government.
No proposed tax reform will be more controversial this year than attempts to alter the Home Mortgage Interest Deduction (HMID).
Considered the holy grail of tax deductions, the annual tax break to homeowners, which provides more than $100 billion a year in tax relief, could see significant changes, thus affecting the finances of millions of Americans.
But in order to understand how these changes could affect you, one needs to understand how this tax break became so monstrous in the first place, and what the impact of such proposals could have on the housing markets.
In fact, this very issue proves why even grander tax reform is necessary right now in the United States.
The Fight Club: Are "Dignity Mortgages" Essential or Insane?
Editor's Note: There's a new idea sweeping through the country. It's called dignity mortgages.
Backers say this new financing idea will help millions of homeowners and get the middle class back to the heart of the American recovery.
Opponents think it's a recipe for disaster that will make the first financial crisis look like a cakewalk.
Today the Fight Club is taking on this growing issue -- let's get ready to rumble...
Buy, Sell or Hold: Is Lennar's Big Move Just a Sign of Another Housing Bubble?
All you have to do is look at a price chart of Lennar Corp (NYSE: LEN) to see the proof that the U.S. housing market is on the mend.
Since January 2012, shares of the Miami, Fl.-based new homebuilder have more than doubled.
In fact, since the industry nearly collapsed six years ago, new-home construction for builders like Lennar is now clearly on an upswing.
According to the March 2013 report from the U.S. Commerce Department, new home construction was on pace for more than one million units for the first time since the gaudy days of June 2008.
Much of this home-buying fervor can be attributed to a few important points:
1. A pent-up demand that has built up over the last six years,
2. Low inventories,
3. And an outrageously low interest rate environment thanks to the Federal Reserve.
The question now is whether or not the "Housing Bubble 2.0" still has legs, making Lennar Corp. a smart new buy with plenty of room to run.
Is Lennar Still a Buy?
Of course, evaluating Lennar on its own merits is a fine exercise in due-diligence.
Are "Wall Street Buyers" Like Blackstone Group Creating Another Housing Bubble?
Where there's smoke there's fire.
When it comes to rising home prices, the question is whether the on-fire price increases are a healthy sign of a housing recovery or a smoke screen masking another investor-led real estate bubble.
The answer is it's both.
So, the real question is: are the two compatible and is the trend sustainable.
The answer to that compound question is "yes" and "no," in that order.
On the surface, everything is coming up roses.
These 5 Charts Prove the Housing Recovery is for Real – and Just Beginning
The housing market has rebounded in a big way, with home prices increasing the most since the housing bubble burst in 2006.
Prices aren't the only indicator pointed toward recovery.
Housing barometers including sales, permits and housing starts have surged well beyond their recession troughs and back into healthy territory - and bullish analysts say there's plenty more room for growth after years of decreased activity.
The housing market activity has been driven by pent-up demand, improved consumer confidence, low interest rates and still affordable prices. And the industry's comeback comes at a time when supply is tight. The inventory of homes available is at near-historic lows, and foreclosures have declined.
Is This a Recovery or a New Housing Bubble?
Investors have taken comfort from the recent improvement in housing prices seen across the country.
But now the shares are rolling over. Could the relative underperformance of the homebuilders be telling us something?
David Stockman, former director of the Office of Management and Budget under President Ronald Reagan, thinks so.
In an interview with The Daily Ticker, Stockman said, "I would say we have a housing bubble again. I don't think we have a real, organic, sustainable recovery."
Stockman argues that "fast money" is moving into the local real estate markets that suffered the biggest declines in order to "speculate in buy-to-rent for a quick trade."
Stockman thinks that these speculators will be looking to sell out as soon as prices rise sufficiently to give them a specific rate of return and that "they will be gone as quickly as they came."