Rising home prices are not included in the Consumer Price Index calculation, which instead uses a system of “imputed rents” to figure the cost of housing and accounts for almost one quarter of the CPI.

The rise in residential real-estate according to the imputed rent measure used by the BLS, is up by about 3% annually.

Median sales prices of existing homes were up 14.1% in January when compared to January of 2020, and 12.6% when compared to prices in December 2020.

The central bank continues to push its short-term interest rate to near zero, and continues to purchase $120B of securities each month, including $40B of agency mortgage-backed securities.

One thing to keep in mind is that mortgage rates are going up

And mortgage rates are closely tied to the yields on 10-year Treasury bond

Were beginning to see mortgage rates climb as the 10-year Treasury bond rate, as well as the 30-year yield increase.

If the trend of rising yields and subsequently mortgage rate increases continues, we may see a slow-down in the real-estate markets, especially with residential home sales.

Let’s not forget the impact rising bond yields have on stocks – larger institutions will sell-off their equities holdings in favor of capitalizing on the yields from bonds and other fixed income assets like Treasuries. Not only will they sell off equity holdings as a caution against risk, they will direct future funds that would have gone into equity holdings, towards bonds with climbing yields.

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