Study of the Monthly Supply of Houses versus the 10-Year US Treasury
After reviewing 2010-2019 St. Louis Federal Reserve data on the monthly supply of houses (in months) compared to 10-year constant maturing treasury (CMT) rate, we see a relationship between the increase in supply as rates increase.
The data is graphed on a scatter plot below showing a positive correlation between the variables.
Further investigation was performed to see if his relationship is maintained across ten-year vintages from 1963 to the present. We see a similar relationship in the data except for the 2000-2009 vintage.
Correlation Coefficients for the decades pictured below with 2010-2019 most closely matching the 1990-1999 coefficient as seen on the graph.
Date Range 1963 - 1969 0.18 1970 - 1979 0.21 1980 - 1989 0.41 1990 - 1999 0.68 2000 - 2009 -0.52 2010 - 2019 0.57
Some data screening was performed by removing the 2007-2009 date range from the dataset. The coefficient for 2000-2006 still remains close to zero at 0.01 with the updated graph pictured below - showing little relationship between the 10-year treasury and the months of supply of housing for the 2000-2006 vintage.
Disclaimer - This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.