Summary: Short term rises in mortgage rates slow or cut the rate of new home sales. Presumably, as long as mortgage rates are trending upward, stocks of home-builders will remain under pressure. The longer-term trend in home-sales is open to question.
Relationship: There are five periods of rising rates. Episodes 1 and 2 saw a distinct rate increase and a distinct drop in new home sales. The larger rate saw the bigger drop in new-home sales. Episodes 3, 4 and 5 saw small rate increases, accompanied by levelling off of previously-climbing new home sales. However, the rate increases were temporary and brief. When they ended, new home sales climbed again.
New Home Sales: The other interesting thing about the graph is the way the new-home sales have risen since the early 1990s (i.e. the long term changes). It does not seem unreasonable, when compared to the long-term decline in mortgage rates. Will explore this more in another post.
Data sources (see hyperlinks) and other such details: The graph shows 30-year Mortgage rates and New Home Sales (in units). The Y-axis scale does not appear meaningful bcause it is not absolute interest rate or absolute sales. Instead, it is the number for each year (rates on July 1st) expressed as a ratio to the average number for the 1972-2005 period.